Ding Dong! Avon Goes Calling For A New CEO

Marketing wunderkind Andrea Jung, whose attention to product detail did not extend to the day-to-day operational details of running a direct sales operation, will be stepping down as CEO of Avon as soon as a replacement from outside the company is found. She will continue as executive chairman at that point and will help in the transition. Avon says that Jung proposed the arrangement, and she says she will “devote the next two years at least to help the new CEO ‘do whatever it takes to get the company back on track,’” writesWomen’s Wear Daily’s Andrea Nagel.

The former Brandweek “Marketer of the Year” (1996), who was also one of Ad Age’s “25 Women to Watch” and the recipient of the American Advertising Federation's Advertising Hall of Achievement award in 1997, has been CEO since 1999 -- the longest tenure of any woman currently atop a Fortune 500 company (but there only were 12 as of May 2011). She is also on the boards of Apple and General Electric and is ranked No. 6 on Fortune’s “50 Most Powerful Women in U.S. Business.”



In her first five years as CEO, Avon’s revenues rose from $5.3 billion to $7.7 billion and profits nearly tripled, Fortune’s Oliver Ryan reported in a March 2006 article. But by the fall of 2005, sales momentum -– and the company’s stock price -- were going south.

Then there was the “disastrous third-quarter earnings report in which Avon said it faces a pair of Securities and Exchange Commission inquiries and tossed out its sales targets as unreachable. The results, which were marred by the failed implementation of a new computer system in Avon's key Brazilian market, were the latest in a string of gaffes that had left analysts and investors questioning Jung's management skills," write the Wall Street Journal’s Joann S. Lublin and Hannah Karp.

Avon’s shares have declined 45% this year but the stock price rose 6% to $17.10 in after-market trading but Jung is looking at the broader picture, of course.

"Over the past years, we have transformed the business from a decentralized group of local operating entities to a globally-managed business in over 100 countries with global brands and a global operating model,” Jung says in the statement. “In the process, revenues have more than doubled, and the number of representatives has doubled as well.”

Most Wall Street analysts, who tend to have very short-term memories, were heartened by the news of her transition, be that as it may.

“In the last year, Ms. Jung has had unusually combative earnings calls with analysts who follow her company,” writes Andrew Martin in the New York Times. Illustrating that point, the WSJ’s Lublin and Karp cite a conference call in October in which Citigroup analyst Wendy Nicholson said Avon is "so totally screwed up in so many ways, the change has to be radical."

Jung’s exit as CEO has been “expected in people’s dreams and wishes and hopes,” Caris & Co. analyst Linda Bolton Weiser tells Martin. “Somehow, I thought she was going to hang on longer. It seemed like the board was giving her a chance for another comeback.”

“The outcome may not have been a surprise, but the alacrity of the decision is,” Ali Dibadj, Sanford C. Bernstein & Co analyst tellsBloomberg’s Matthew Boyle “We were expecting something after the holidays. The company has been under a lot of pressure, and so has she. It’s not an easy fix.”

An industry source tells WWD’s Nagel that Jung’s successor should be more adept at direct-selling than consumer packaged goods.

“This isn’t about loading docks or trucks or the supply chain. This is a direct-sell fix. The company isn’t broken, it’s folded its cards,” according to this observer. “I refuse to believe the Avon model is irrelevant.”

In an interview with Nagel, Jung said it was time to find “the next great leader” and she “completely dismissed speculation on Wall Street that she had ‘checked out’ five years ago when the business began to deteriorate.”

Lublin and Karp point out that Jung has “won admiration for her attention to detail, including once insisting on a redesign of Avon's lipstick cases because she felt the swivel mechanism wasn't smooth enough” but reportedly is not viewed highly by the “working-class” reps in North America, “some of whom find her cold and out of touch.”

She is immensely popular with reps overseas, however, and moved early into developing markets such as Russia and China, giving Avon an early edge on competitors, Martin points out.

 “She is really adored internally,” Barclays Capital analyst Lauren Lieberman says. “She lights up a room. She is all the things you would want a CEO to be.”

Her Chinese parents instilled a strong work ethic in Jung, 53, according to the Encyclopedia of World Biography, and she joined a training program at Bloomingdale’s after graduating from Princeton University. She later became evp in charge of merchandising for women's apparel, cosmetics, and accessories at Neiman Marcus and started working for Avon as a consultant in 1993. She was hired as president of the product marketing group for U.S. operations in 1994, when she began taking “the failing company out of the depths of marketing oblivion into a world of young, hip makeup products.”

When she took charge of global marketing in 1996, one of her first steps was to revamp Avon’s product line, Boyle reports, discontinuing 15% of the offerings and introducing most upscale cosmetics.

“She dropped gift items and some fragrances, added products such as Anew skin-firming cream with retinol, and expanded into swimwear and spa products such as bath gels.” Boyle writes.

Jung also is the executrix of the “Ding Dong, Avon Calling” tagline that dated from the 1950s. Now the ding dong tolls for she.

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