Superb Yield From Avon, #1 Mass-Market Beauty Company

Avon (NYSE: AVP) is the leading direct sale beauty company in the world. The company operates under one channel: direct selling (6 million representatives). Avon operates internationally, operating in Latin America, Europe Middle East and Africa, and Asia-Pacific operating in more than 70 countries, especially in Brazil, Russia and Mexico.
Investment characteristics: Instrument type
Fixed Income
Level of risk
Medium to high
Investment horizon
Short to medium
Strategy
Hold to maturity

Avon’s short-term bond prices declined by 3-5% from the end of September. The main reason is poor Company performance for a long period of time and lower management guidance. Currently, Avon suffers from its direct selling model and needs to shift to e-commerce model. The company published poor last four consecutive quarter results due to declining number of active representatives and sales volume. We expect that Avon’s number of representatives and sales volume will decline slowly and the company will be able to refinance or repay its debt with maturity in 2019-2020. We believe that Avon has strong brand recognition in Latin America and Eastern Europe and it needs significant amount of time for people to start buying competitors’ products. Moreover, the company implements a transformation plan which should save some amount of money next years.
Investment thesis Avon’s bonds represent a good relation yield-duration-credit risk. There are... Read more

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