Johnson Fistel Files Class Action Suit Against Avon Products, Inc.
SAN DIEGO- PRNewswire —February 15, 2019
Johnson Fistel, LLP announced that a class action has been commenced on behalf of purchasers of Avon Products, Inc. (NYSE: AVP) (“Avon”) common stock during the period between August 2, 2016 and August 2, 2017 (the “Class Period”).
If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from February 14, 2014. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact Jim Baker at ([email protected]) at 619-814-4471. If emailing, please include a phone number. To view a copy of the complaint [Click here].
The complaint charges Avon and certain of its current and former officers with violations of the Securities Exchange Act of 1934. Avon is a global manufacturer and marketer of beauty and related products. Avon’s business is conducted primarily in one channel, direct selling to Avon representatives. Avon representatives then resell Avon products to end-user customers. As of December 31, 2016, Avon had approximately 6 million active representatives.
The complaint alleges that during the Class Period, in order to inflate its reported revenue and representative growth metric, Avon engaged in an undisclosed scheme whereby it significantly loosened its credit terms in order to recruit new representatives in Brazil, its largest market. Avon did not disclose the changes to its credit terms in Brazil. Avon also failed to increase its allowance for doubtful accounts to account for the changes to its credit terms in Brazil. As a result of the concealment of defendants’ scheme during the Class Period, the price of Avon stock was artificially inflated to as high as $6.89 per share.
On November 3, 2016, Avon filed its Form 10-Q for the quarterly period ended September 30, 2016 and disclosed that its operating expenses and margins had been negatively impacted by higher bad debt expense. Over the next two days, the price of Avon stock dropped $0.47 per share to close at $5.94 per share on November 4, 2016, a decline of more than 7%. On February 16, 2017, the Company issued a press release announcing its fourth quarter 2016 results and held a conference call to discuss the results. The Company reported a net loss of $0.03 per share and a 2% decline in active representatives. The Company also disclosed a $35 million bad debt charge attributable to the previously undisclosed changes to credit terms to recruit new representatives in Brazil. As a result of this news, the price of Avon stock dropped $1.09 per share to close at $4.77 per share on February 17, 2017, a decline of nearly 19%. On the following day, February 18, 2017, the price of Avon stock dropped again, falling over 3% to close at $4.61 per share. On May 4, 2017, Avon issued a press release announcing its first quarter 2017 results and held a conference call to discuss the results. The Company reported a net loss of $0.10 per share and a 3% decline in active representatives. On the call, Avon disclosed that despite its earlier assurances that the Brazil bad debt problem had been fully accounted for in 2016, the Company was recording another significant charge for bad debt tied to Avon’s decision to loosen its credit terms to recruit new representatives in Brazil. As a result of this news, the price of Avon stock dropped $1.03 per share to close at $3.62 per share on May 4, 2017, a decline of 22%.
Then, on August 3, 2017, Avon issued a press release announcing its second quarter 2017 financial results and held a conference call to discuss the results. The Company reported a net loss of $0.12 per share and a 3% decline in active representatives. The Company also reported that Brazil revenue was “down 2% in constant dollars, primarily driven by a decrease in Active Representatives.” On the call, Avon’s CFO acknowledged that, despite Avon’s earlier representations, the remedial actions in Brazil (i.e., stricter credit terms applied to recruiting new representatives) were negatively impacting active representatives and revenue in Brazil. As a result of this news, the price of Avon stock dropped $0.36 per share to close at $3.00 per share on August 3, 2017, a decline of nearly 11%.
Plaintiff seeks to recover damages on behalf of all purchasers of Avon common stock during the Class Period (the “Class”).
About Johnson Fistel, LLP:
Johnson Fistel, LLP is a nationally recognized shareholder rights law firm with offices in California, New York, and Georgia. The firm represents individual and institutional investors in shareholder derivative and securities class action lawsuits. For more information about the firm and its attorneys, please visit https://www.johnsonfistel.com. Attorney advertising. Past results do not guarantee future outcomes.