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Avon Products Inc. (NYSE:AVP) shares tumbled nearly 3.5 percent on news that the company named Johnson & Johnson (NYSE:JNJ) executive Sherilyn McCoy as its new chief executive officer. Andrea Jung, current Chairman and CEO, will remain with Avon as executive chair. Investors were perhaps not happy with the choice of McCoy, an unknown quantity, and her appointment coming so quickly after Avon’s board rejected Coty’s public offer for the company last week.
“This is likely a clear sign that Avon’s board is actively resisting Coty’s acquisition offer, especially given the timing of today’s announcement so quickly on the back of last week’s public offer by Coty,” Bernstein analyst Ali Dibadj said in a research note.
McCoy faces significant challenges in her new assignment. Sales have been sliding at home and in new, important markets such as Russia and Brazil, and the company faces a federal investigation into alleged bribery overseas. She would also have take steps to revitalize Avon’s force of U.S. sales representatives, known to be demoralized after considerable downsizing.
But the new CEO has “a unique combination of strategic and finely honed operational skills, a significant turnaround track record, global experience and people leadership,” Fred Hassan, lead director of Avon’s Board, said. McCoy will report to the company’s board of directors, Avon said in a statement on Monday.
The confidence may be justified, considering her track record at J&J, where she steered the company’s pharmaceutical division through patent expirations on major products.
“You have got to give her some credit for reshaping the pharmaceutical division into a very well run and what looks like a very well-positioned business at J&J,” Morningstar analyst Damien Conover said. “She has really steered that business through some fairly major patent expirations over the past couple of years and made the pipeline relevant again,” he said, pointing to new medicines for prostate cancer, stroke prevention and psoriasis.
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