Avon investors may receive additional information about the case by clicking the link "Submit Your Information" above.
According to the complaint, Avon is a global manufacturer and marketer of beauty and related products. Brazil is Avon’s largest market, measured by revenue and number of sales representatives. In 2016, Brazil revenue was $1.2 billion, approximately 21% of Avon’s total revenues. Unlike most of its competitors, which sell their products through third-party retail establishments (e.g., drug stores and department stores), Avon’s business is conducted primarily in one channel, direct selling to Avon representatives. Avon representatives then resell Avon products to end-user customers. Representatives are generally precluded from submitting a new order for Avon products until the accounts receivable balance past due for prior orders is paid. Avon represented to investors that it records an estimate of an allowance for doubtful accounts on receivable balances based on an analysis of historical data and current circumstances.
The complaint alleges that, on November 3, 2016, Avon filed its Form 10-Q for the quarterly period ended September 30, 2016 and disclosed that its operating expenses and margins had been negatively impacted by higher bad debt expense, primarily in Brazil. Following this news, the price of Avon stock fell $0.17 per share to close at $6.24 per share on November 3, 2016, a decline of nearly 3%. On the following day, November 4, 2016, the price of Avon dropped fell again, falling 5% to close at $5.94 per share.
Then, on February 16, 2017, Avon issued a press release announcing its fourth quarter 2016 results. Avon reported a net loss of $0.03 per share and a 2% decline in active representatives and disclosed a $35 million bad debt charge attributable to the previously undisclosed changes to credit terms to recruit new representatives in Brazil. Following this news, the price of Avon stock dropped $1.09 per share to close at $4.77 per share on February 17, 2017, a decline of nearly 19%. On the following day, February 18, 2017, the price of Avon stock dropped again, falling over 3% to close at $4.61 per share.
On May 4, 2017, Avon issued a press release announcing its first quarter 2017 results. Avon reported a net loss of $0.10 per share and a 3% decline in active representatives. Following this news, the price of Avon stock dropped $1.03 per share to close at $3.62 per share on May 4, 2017, a decline of 22%.
Finally, on August 3, 2017, Avon issued a press release announcing its second quarter 2017 financial results. Avon reported a net loss of $0.12 per share and a 3% decline in active representatives. Avon also reported that Brazil revenue was “down 2% in constant dollars, primarily driven by a decrease in Active Representatives.” Following this news, the price of Avon stock dropped $0.36 per share to close at $3.00 per share on August 3, 2017, a decline of nearly 11%.
The complaint alleges that in order to inflate its reported revenue and representative growth metric during the Class Period, Avon engaged in an undisclosed scheme whereby it significantly loosened its credit terms in order to recruit new representatives in Brazil, its largest market. Avon did not disclose the changes to its credit terms in Brazil. Avon also failed to increase its allowance for doubtful accounts to account for the changes to its credit terms in Brazil.
If you are a member of the class described above, you may no later than April 15, 2019 move the Court to serve as lead plaintiff of the class, if you so choose.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of their choice, or may choose to do nothing and remain an inactive class member.
Kessler Topaz Meltzer & Check, LLP has not filed a complaint in this matter. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP toll free at 1-888-299-7706 or 1-610-667-7706, or via e-mail at firstname.lastname@example.org. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.
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