Moody's: Avon outlook negative

Moody's Investors Service said it affirmed Avon Products Inc.'s A2 senior unsecured long-term debt rating and Avon Capital Corp.'s Prime-1 short-term debt rating and changed the outlook to negative.

The change in outlook reflects the risk that Avon may not achieve Moody's benchmarks for improved operating performance and credit metrics by the end of December, that the company will need to continue to maintain heightened advertising and investment spending in order to sustain revenue growth and market share and the company's aggressive reliance on short-dated commercial paper with bunched maturities, the agency said.

While Moody's recognizes the early benefits of the company's multi-year restructuring initiatives, Avon has been more aggressive in reinvesting these realized savings in significantly increased advertising and growth initiatives, the agency said, and profitability remains well below historic levels as a result.

The ratings continue to be supported by Avon's position as the world's largest direct selling company, its strong brand recognition, its broad geographic diversification and growing success in developing markets, as well as its historically strong cash flow and relatively conservative financial policy.

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