"Although I'm very leery of the market now, I'll continue to buy gradually when specific stocks are attractive," says Jack Adamo. In Insiders Plus, he looks to a new idea: Avon Products (NYSE: AVP).
"Avon's stock got whacked when fellow paint sellers, Estee Lauder and Elizabeth Arden, guided earnings lower, and analysts lowered earnings expectations for Avon to about $1.90 for 2009.
"They're probably still too optimistic, but I'm buying the stock anyway. We owned Avon for almost 3 years, and sold it for $43.47 in September for a 69% profit.
"Avon's CEO, Andrea Jung, is doing a great job, as I said she would the day we first bought the stock. She met with a lot of skepticism, and frankly, I think it was mostly because she's a woman. So be it; those with a biased view lost out on the big gains we made.
"Just as she handled the restructuring well, I think Jung will do well with the current macroeconomic problems. Profits are being hit right now by the weak economy and strong dollar, which makes products more expensive overseas, and causes sales to translate to fewer dollars when repatriated.
"Both factors shall pass. The dollar will slide against other currencies once the flight to "safety" recedes. As I said a few weeks ago, grabbing onto the greenback for safety is like a drowning man grabbing a bowling ball. Give it a few quarters; the dollar will sink again.
"Avon has always been known as a good value proposition. The company did a good job of upgrading its product line during the high times of the last few years and it is just as adroitly refocusing on value in this tough environment.
"It has also traditionally gained a lot of new sales-people during recessions. It will take some months to get them up and running, but once they are, they'll contribute to revenue.
"Avon has quietly been one of the best growth companies in the world for decades. It's available now for about 11-times earnings.
"All the elements are still in place, with plenty of future growth on tap in China, India and South America. This is a good entry point for the stock. The shares are yielding 4% at its current price."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
4-14-2009 @ 10:32AM
me said...
I am in the United States. My experience as an Independent Avon Sales Representative has been a costly disaster. Why? Because Avon is over-recruiting. Why is Avon over-recruiting? Because of high turnover. What might contribute to high turnover? Representative unhappiness. This is everything that has happened in a nutshell. I sign up. I am shown a pyramid scheme mousepad that shows that if I sign up so many women, I will get $1200 in cash bonuses plus commissions on their purchases. The very day I signed up, I was asked how many recruits I planned to get in my first campaign. Being the dullard that I was, I did not know a thing about pyramid schemes, but I was surprised that I was expected to, "Sell, Show (how to do what I do), and Share (the 'opportunity' of being an Avon rep) with each and every women I encountered. In fact, a minimum of 3 women per day ("the Power of 3"). I thought, silly, I just want to sell. So I started handing out brochures. Heard stories, "Avon rep took my order, disappeared." "Avon rep took my payment, disappeared." "I used to sell Avon, and now I won't even look at a brochure." "Disgusting company." Difficult to keep your chin up. But I did. Found out both by studying Avon and the hard way that it takes 100 brochures to land 1-2 customers. The numbers hold true. I've spent $100s on Avon brochures over four months and have no more than 20 customers. And customers place average orders of $25 every 4 campaigns (8 weeks). That's means I get around $125 in orders campaign. But 50% of those are at 20% earnings. $12.50. And 50% at 40% earnings. $25 profit. Right? No. My earnings have been less because of the cost of brochures, $40-60 per campagin. Samples $5 per campaign. Demos $10 per campaign. Trade show tables $10 avg. per campaign. And actual gross earnings after the 20% first order discount (because there is an Avon rep on every corner, and it's the only way to get anyone to call at all) mean you need to deduct your expenses out of $5 in net earnings. Woo-hoo. Eventually you get return customers. Mostly seniors, who, without a 10% discount, won't buy from you at all. They also need payment plans, which is ok, but Avon expects you to pre-pay for items for which you have not received payments yet. So you are running $50-100 in A/R per campaign. Which comes out of your pocket and "profits" in the meantime. You go to your 'superiors' with all of your efforts: flyers, brochures, door-to-door, trade shows, answering questions, etc., etc., etc., and they accuse you of being lazy and not "working your business" like a business. Instead of busting the pyramid scheme, they tell you you aren't meant to make money selling product. That now the only way to make money with Avon is to recruit. And you are stubborn and lazy (for not drumming up even more competition for your business.) And if you dare speak the truth, you are "too negative" and "attracting negative things to happen to you." (I'm finding a lot of 'older' reps are devotees to the Secret and spout it's idiocy.) I've had women with no sales experience chastise me, with my decade of sales experience, telling me I'm just not trying hard enough.
In the meantime, back at Avon, Inc., my orders arrive with damaged or missing products. Backorders a page long. Commands of "do not reorder" printed on my invoice. Shipments that never arrive, or, joy, land on another rep's porch. Shipments that are delayed with no apology. Customer service in India that have no power to help with major problems. No phone number to the USA for reps that sell less than $10 grand a year. All of these issures require hours on the phone to a toll-number.
Let's see. Why such high turnover? It has something to do with Avon's lousy rep service, spamming recruiting ads in the brochures we pay for, over-recruiting, sending us damaged/defective merchandise, sexually suggestive covers, customer service in India where we can't understand each other, mean and judgemental 'uplines' who are just greedy women higher up in the pyramid scheme, and tripping up a representative in every way possible -- damaging a good representative's reputation to the point where the handful of customers she worked desperately hard to gain simply jump ship and give up on buying Avon. Except at Avon.com and eBay of course.