This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The 5 Dumbest Things on Wall Street This Week: WMT BBRY AVP

5. Avon Gets Dinged

Come on Avon (AVP - Get Report). Open up the door and let Uncle Sam in already. Hiding behind a legal curtain is clearly not helping you.

The cosmetics seller saw its credit rating placed on review for downgrade by Moody's last Friday as a result of the company's settlement discussions with the SEC and DOJ over a foreign bribery probe. Regulators want Avon to pony up more than $100 million for its misbehavior, according to a WSJ report, while Avon CEO Sheri McCoy said this summer she's looking to settle for around $12 million.

Yes, you can drive a truck through that difference. More than that, actually. A fleet of trucks with its own private fleet on the side.

Moody's pending decision affects $2.4 billion worth of Avon debt, which is already rated a far less-than-pristine Baa2. Avon saw its bonds sink in value this week as a result of the uncertainty, while the cost of insuring its debt rose by half a percent. The selloff in Avon's bonds followed last Thursday's shellacking in the stock, which dropped 20% after the beauty products purveyor posted a third-quarter loss of $5.5 million compared with a $31.6 million profit last year.

"The third quarter was tough," McCoy said. "However, overall, Avon is headed in the right direction, parts of our business are stabilizing, and we are making progress toward our three-year financial goals."

Get real, McCoy. We know your predecessor Andrea Jung left you in a tough spot, but unless you mean "down," you are definitely not heading in the right direction. Avon's North American sales fell about 19% in Q3, while its China division posted a 67% decline in revenue.

And it's not just down, its "out," too. The company is exiting emerging markets such as South Korea and Vietnam when the rest of the world is piling in.

"We have cash balances. And obviously, we also have a revolving credit facility that we have in place for backup liquidity needs," said McCoy.

See here, Sheri. You have $800 million in cash on hand and access to more. We highly suggest you tap into it to get the government off your back so you can get back to business. We're not sure what your lawyers are telling you, but after spending $340 million in legal fees in the past five years, it's clear to us that they are the only ones benefitting from this silly standoff.

Put simply: Find a reasonable sum and be done with it. Otherwise, your bonds will be downgraded to junk, your borrowing costs will skyrocket and all the make-up in the world won't cover up whatever ugliness comes next.
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AVP $3.33 -0.30%
WMT $60.24 0.53%
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs