New Avon CEO Has Her Work Cut Out for Her

At almost any other consumer product firm, the appointment of Sherilyn (Sheri) McCoy as chief executive officer would probably be welcome news. But with a raft of problems that only seem to grow by the day,  Avon Products  isn't any other company.

The announcement Monday that McCoy will assume the CEO post at Avon on April 23 may not be the appointment investors were hoping for, at least based on the stock's weakness in early trading. While McCoy brings a solid record after 30 years with  Johnson & Johnson (JNJ), where she rose to the role of vice chairman of the company's pharmaceutical and consumer divisions (among others), there is no cape flowing behind her, and at this point Avon's problems are so numerous we think superhuman powers may be needed to fix them.

With the possible exception of when Meg Whitman joined  Hewlett-Packard (HPQ), we can't think of a new CEO appointment in recent memory where the incoming candidate had to face such a full plate of issues. Avon's problems aside, McCoy's appointment would still give us pause. She has no direct-sales experience, which could prove to be a serious liability (we hesitate to say kryptonite) in any effort to turn the company around.

At its heart, Avon is a company that allows women to improve their lives by building a business for themselves. Viewing the firm through a traditional consumer product lens will obscure the key driver of the firm's fortunes, which is the representative experience and opportunity. Avon has failed its reps on both fronts over the past several years with execution missteps overseas and here at home. Ongoing investigations into bribery allegations that reach the firm's executive suite have created a backdrop of mistrust in the leadership and set the stage for an unwanted acquisition offer last week from privately held beauty care firm Coty.

We are maintaining our $25 fair value estimate for the shares and we await McCoy's first presentation as CEO, especially her assessment of Avon's current problems and her plans to address them.

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