What happened
Shares of Avon Products (AVP) skyrocketed 155.3% through the first six months of 2019, according to data from S&P Global Market Intelligence, as the beauty products retailer first implemented an aggressive restructuring plan before ultimately agreeing to be acquired.
Shares first soared 54% in January on news of the aforementioned restructuring initiative -- which was intended to significantly reduce inventory, streamline operations, and cut 10% of its global workforce. That momentum extended into February by jumping another 32%, despite initially slipping in the wake of a weaker-than-expected fourth quarter 2019 report.
Image source: Getty Images.
So what
Investors should also keep in mind that as of the start of this year, the stock had plummeted nearly 80% from its late 2017 highs as the company struggled to implement its turnaround and find sustained, profitable growth. But despite a lack of tangible progress to those ends, traders continued to drive shares of Avon higher in April by placing bets that its restructuring might finally yield notable improvements. Here again, however, the stock gave up those gains when an underwhelming second-quarter report came out in May, including a 14% decline in revenue (or 3% at constant currency) and adjusted earnings of $0.03 per share.
Still, CEO Jan Zijderveld insisted the company was pleased with its progress at the time, highlighting improvements in revenue trends from three of its four key geographies after excluding the effects of foreign currencies. Avon also saw its adjusted operating margin expand by 50 basis points.
And Avon management wasn't the only group impressed. A few weeks later, shares jumped another 10% when Avon confirmed that -- after months of negotiations -- it had agreed to be acquired by Brazil-based peer (and the parent company of The Body Shop) Natura Cosmeticos in an all-stock deal valued at roughly $2 billion.
Now what
As it stands, the acquisition is still subject to the approval of regulators and both companies' shareholders. But assuming all goes as planned, it should close in early 2020. So given Avon's incredible rise so far this year -- and unless waiting longer to sell might mean more favorable long-term capital gains tax treatment for your profits -- I think Avon investors might do well to take their money and put it to work elsewhere.
