Fitch downgrades Avon's credit rating to BB from BB+ due to company's declining revenue, places credit on rating watch negative

Nevin Barich

Nevin Barich

NEW YORK , November 5, 2013 () – Fitch lowers credit rating of Avon Products to 'BB' because of declining revenue

Fitch Ratings said Monday it downgraded the credit rating of Avon Products, citing the beauty products company's declining revenue.

Fitch lowered its long-term issuer default rating to 'BB' from 'BB+' and said it placed Avon's credit on rating watch negative, meaning further downgrades are possible. The new rating is still in "junk" status and is two notches below investment grade.

The firm cited "deteriorating operations and intensifying business model risk" for Avon Products, which is struggling with weakened sales that have hurt its profitability. On Thursday the New York company reported a loss for the third quarter as revenue in North America fell 19 percent and Asia-Pacific revenue tumbled 22 percent. Avon is working on a turnaround plan to cut costs, leave unprofitable markets and streamline its operations.

Fitch said conditions in Europe and Latin America are also challenging, and said mass market channels appear to be growing faster than the direct sales channels Avon Products has long relied on.

On Friday Moody's Investors Service placed Avon's ratings on review for possible downgrade. Moody's rates the company's credit at 'Baa2.' That rating is investment grade, two notches above junk status

Standard & Poor's Ratings Services has a 'BBB-' rating on Avon Products with a negative outlook. That rating is one notch above junk status.

Shares of Avon Products fell 53 cents, or 2.9 percent, to $17.74. The stock fell a combined 18.4 percent Thursday and Friday after Avon warned that the Securities and Exchange Commission is proposing a much larger penalty to settle bribery allegations than it expected, and that its business could be hurt.

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