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Caris Downgrades Avon On Service Disruptions

The Associated Press

NEW YORK (AP) — Shares of cosmetics company Avon Products Inc. were downgraded on Monday by a Caris & Co. analyst, who warned that Wall Street's second-quarter earnings estimate may be too high, as certain products have not been available to shoppers.

Analyst Linda Bolton Weiser downgraded the stock to "Above Average" from "Buy" and said some cosmetics have not been available to consumers. Weiser said sales representatives have noted problems with product availability, partly because of promotional discounts.

Also, some of Avon's suppliers have closed their factories because of the tough economy.

"Past service disruptions have impacted the business, as a customer does not typically order another item when the one she ordered is unavailable," Weiser said. "Avon loses the sale."

Looking ahead to the second quarter, analysts surveyed by Thomson Reuters expect 34 cents in earnings per share, and Weiser warned this might be too high.

Weiser said shares have risen recently, given enhanced sales recruitment, the company's "smart value" strategy (products offered at lower prices), and the weakening of the U.S. dollar.

Avon's share price has risen 10.5 percent so far this year and is near Weiser's $27 price target. Shares closed on Friday at $26.56.

In midday trading, the stock rose 38 cents to $26.94.