NEW YORK—Moody's Investors Service said Friday that it has put its ratings of Avon Products Inc.'s debt under review for possible downgrade following the cosmetics company's weak third-quarter report and the disclosure that it is under investigation by the SEC.
The company announced Thursday that the Securities and Exchange Commission is investigating its contact with financial analysts in 2010 and 2011, the latest roadblock for the cosmetics direct seller, which is struggling to turn around its results.
Avon also reported its third-quarter net income slipped a worse-than-expected 1 percent, hurt by complications implementing a business system in Brazil and the uncertain global economy. The New York company said it is reviewing all aspects of its business and withdrew its full-year revenue guidance.
Moody's said it put the company's ratings under review as a result. The ratings include "A2" for Avon's senior unsecured long-term notes and Avon Capital Corp.'s "Prime-1" short-term debt.
Moody's said it is reviewing Avon's ability to stabilize and restore its revenue growth and profitability, particularly in key regions like the U.S. and Brazil. The rating agency is also monitoring the impact of the SEC investigation and potential for changes in the company's operating strategy or financial policy given its performance issues.
Avon, based in New York, is the world's leading direct seller of beauty products and jewelry. It is well-known for its "Avon Ladies" which sell items door-to-door or otherwise directly to customers.
Shares of Avon fell 12 cents to close Friday at $18.87, near their low for the past year of $18.17, reached this week. They traded near their 52-week high of $31.60 from October through mid-summer, when they plunged to the low $20 range. They sank again this week.