Oct 8, 2012
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Avon's Jung to leave board early; new CEO in spotlight

Oct 8, 2012

Avon Products Inc (AVP.N) will close the book on the Andrea Jung era at the end of the year, clearing the way for new Chief Executive Sheri McCoy to try to fix the iconic but struggling beauty products company.


Jung, whom McCoy replaced as CEO in April, will step down as executive chairman and board member on December 31, more than a year early, and stay on as a senior adviser, the company said on Friday.

Jung will no longer be a looming presence in the board room as McCoy tries to put in a place a strategy she is still developing to turn around the world's largest direct seller of cosmetics, whose sales have slid in key markets and which is trying to settle a U.S. bribery probe.

Avon shares closed up 7.2 percent at $17.39 on the New York Stock Exchange.

"Jung's exit marks the end of the transition to the new management team at Avon, which should be positively received by the market," said Atlantic Equities analyst Victoria Collin.

Fred Hassan, a well regarded turnaround expert and dealmaker who is lead independent director at Avon, will become non-executive chairman on January 1.

Hassan, who has been on Avon's board since 1999, is also a managing director and partner at private equity firm Warburg Pincus. He was chairman and CEO of Schering-Plough Corp from 2003 until 2009.

But investors are focused on former Johnson & Johnson (JNJ.N) executive McCoy and await her plan for fixing Avon.

Jung was pushed out of the CEO post after a number of major mistakes, ranging from several botched restructurings, dwindling profitability and a probe into whether Avon officials broke U.S. bribery laws overseas as the company sought to develop new markets.

In the first six months of McCoy's tenure, Avon has begun talks to settle the bribery investigation, which has cost hundreds of millions, and hired a new top lawyer.

In August, after Avon reported another poor quarter, McCoy said her priorities were to stabilize revenue, rein in costs and make the job of a sales representative more attractive. She did not say when she would announce a new strategic plan.

In April, Avon said Jung would be its executive chairman for two years. Instead, she will assume the senior advisor role on January 1, and her contract for that position will run through April 2014, the company said on Friday.

Wall Street and Avon shareholders had severely criticized Jung and the board she oversaw for letting the company's problems fester and for what some saw as a lack of serious consideration of a $10 billion unsolicited takeover bid this year by smaller rival Coty Inc.

Some analysts hope Friday's news means further changes to the board are in the offing.

"I think changing several members of the board at Avon is the right thing to do, especially after their awkward dealing - or lack thereof - with Coty," said Sanford Bernstein analyst Ali Dibadj. "My sense is that this is just the start of more moves there."

In April, Avon named former Campbell Soup Co (CPB.N) CEO Doug Conant to the board.

Several board members have been directors since before Jung took the reins, including Hassan, former Time Inc CEO Ann Moore, Stern Group Chairman Paula Stern and Yankee Hill Capital Management Managing Director Lawrence Weinbach.


Jung, 54, joined Avon in January 1994 as president of product marketing for Avon U.S. after holding key positions at companies like luxury retailer Neiman Marcus Group. A board member since 1998, she became CEO in 1999 and was a big draw for Avon's army of direct sales representatives, many of whom liked to see a successful, glamorous woman at the top of the company.

One of the highest-profile women in U.S. business, Jung was in the Top 10 of Fortune Magazine's 50 Most Powerful Women in Business list from 2007 through 2010.

Her popularity was one reason Avon had given last year for keeping Jung on as an executive chairman after her stint as CEO.

The company's international sales grew by leaps and bounds in the first years of her tenure. But things later soured, as problems like an exodus of U.S. sales representatives accelerated and more recently, as sales started to shrink in Russia, China and Brazil, the fastest-growing markets for beauty markets.

Still, Jung was one of the most prominent U.S. CEOs and continues to sit on the boards of Apple Inc (AAPL.O) and General Electric Co (GE.N).

Jung will maintain her base salary of $1 million and other compensation and benefits, a spokeswoman said.

(Reporting by Jessica Wohl, Brad Dorfman and Phil Wahba in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn and Richard Chang)

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