In an effort to avoid a proxy fight with shareholders, cosmetics company Avon Products Inc. (AVP, Financial) disclosed on Monday it is giving a board seat to activist investment firm Barington Capital.
According to Reuters, the New York City-based company agreed to add James Mitarotonda, Barington’s CEO, to its board after the firm threatened to nominate its own directors, citing Avon’s deteriorating performance. In exchange, the firm said it would not pursue a proxy contest and would support management’s nominees at its upcoming annual shareholders meeting.
In its fourth-quarter 2017 earnings report, the struggling cosmetics company posted adjusted earnings per share of 17 cents on $1.6 billion in revenue, seeing no significant change from the prior-year quarter. For the year, it posted adjusted earnings of six cents per share on $5.7 billion in revenue, which were also relatively flat from the year before. As illustrated in the chart below, the company’s revenue and profits have been declining for at least the past decade.
While the company’s operating margin is still positive, it has been declining over the past five years after reaching a high of 12.53% in 2008.
The board seat has not been the firm’s only victory with Avon.
Having attempted several unsuccessful turnaround campaigns in her five years at the helm, former CEO Sheri McCoy agreed to step down last August after Barington called for her removal. In February, the company announced Jan Zijderveld, a former executive at Unilever (UN, Financial), would be replacing her.
McCoy has not been the only leadership change, however. In 2017, the company also appointed a new chief operating officer and made changes to several other positions.
Along with Shah Capital and NuOrion Partners, Barington, who has held a stake in the company since December 2015, has also been encouraging management to consider a sale.
Of the gurus invested in Avon, Donald Yacktman (Trades, Portfolio)’s Yacktman Asset Management has the largest position with 4.46% of outstanding shares. Jim Simons (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) are also shareholders.
While Avon’s shares initially traded about 3% higher following the announcement Monday evening, the stock was down nearly 2% on Tuesday morning at $2.80. GuruFocus estimates the stock has gained 29% year to date.
Disclosure: No positions.
