Ten weeks into the job as CFO of troubled cosmetics company Avon Products, Kimberly Ross wants to make significant changes. But she’s likely to find that hard sledding until she gets a permanent boss.
For now, Ross said today during her first earnings call with Avon since joining the company in December, she’s addressing the most conspicuous changes. She and departing Avon chief executive Andrea Jung have been reviewing the company’s operations and finances for possible long-term, strategic reforms. But they’re holding off on any decision until Jung’s successor is named. “We’re not standing still,” said Ross. “I am helping drive the business review, and I have seen obvious operational and cost-cutting opportunities that we can realize in the short and long term.”
Ross is also considering changes to the finance department. “We need to continue to look at additional changes, specifically in the way we work and some of our processes,” she said. She is particularly keen on improving the company’s forecasting abilities, without having to invest in a new computer system.
Yet Ross will be managing a finance department with a scandal still hanging over her head. Her predecessor, Charles Cramb, was fired in January related to an ongoing Avon internal investigation into whether the company violated the Foreign Corrupt Practices Act in China.
The company logged $96 million in costs related to the probe in 2010, nearly double what it had recorded the previous year (Avon’s figures for 2011 won’t be available until it files a 10-K with the Securities and Exchange Commission). Crumb was one of several executives let go since the company began its investigation in 2008. Further, the Department of Justice and the SEC are investigating the company.
Ross and other senior executives at Avon have also had to deflect accusations of management incompetence. During the company’s Q3 call in October, analysts suggested the company needed a major reworking. “You guys are so totally screwed up in so many ways,” said Wendy Nicholson, a Citigroup research analyst. The company has been hurting from expansion mishaps, inventory issues, rising wages, commodity inflation, and an ongoing regulatory probe.
In reporting its Q4 results on Tuesday, Avon revealed a $400,000 loss. It had made $229.5 million during the same period the previous year. Company executives attributed the loss to restructuring charges and an impairment charge for its 2010 acquisition of Silpada Designs, a jewelry company whose revenue has been hurt by a rise in silver prices.
Negative news has become routine for Avon. Both Ross and Jung, who will be stepping down as CEO but retaining the title of chairman when a successor is named, described Avon as a company that will be in transition throughout the year. Any large strategic changes they want to make will first be reviewed with a new CEO and will not be publicized until then.
In the meantime, the company will make only “tactical” changes, Jung said. For Ross, one of her most immediate concerns is cost cutting — and the company plans to reduce head count soon. Without elaborating on the call, she said the cuts would not be as extensive as some of those made in Avon’s past.
Ross is no stranger to companies in transition, having joined Avon from Dutch food-services company Ahold, where she was similarly tasked with paring down costs and streamlining processes to make the inner workings of the company run more smoothly. Also part of her job there was moving the company beyond its 2003 accounting scandal, which included executive resignations and regulatory scrutiny.