The 12 worst investments of 2014, #12: Avon Products Inc

Decline in 2014: -44.81%

See all 12 of 2014’s worst investments here

What happened?

Mismanagement, declining sales and the long arm of the law each played their part in a terrible year for Avon, the world’s largest direct seller of beauty products. The company coughed up $135m (on top of $300m spent on an internal inquiry) to settle a long-running bribery case this year. From 2004 to 2008, Avon gifted $8m-worth of cash, luxury goods, and European travel to Chinese officials to smooth the acquisition of a sales licence; in 2014, they paid the price.

Huge slumps in sales worldwide also contributed to Avon’s woes: North America saw sales fall 17% year on year, while sales in Asia-Pacific dwindled by 16%, thanks in part to Avon’s withdrawal from their failing businesses in South Korea and Vietnam.

Who are the losers?

The 600 staff – mostly US-based – cut by Avon in July, said Business Insider.

Who are the winners?

Avon’s rivals will this week be toasting a very good year, with Estée Lauder (up 2.93%) and L’Oréal (up 12.9%) significantly outperforming the troubled company. Executives at global beauty giant Coty – who had a $10.7Bn offer for Avon rejected in 2012 – will feel particularly smug, said BBC news. Since that offer was rejected, Avon’s value has dropped to $4.072bn, a fall of 61.94%. Meanwhile, Coty’s share price has grown by 34.98% in the last year alone.

What have we learned?

Some hangovers get much worse before they get better.

See all 12 of 2014’s worst investments here

 

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