Moody's cuts Avon to negative

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

The negative outlook reflects weakening credit metrics in recent quarters that are likely to remain under pressure in a difficult operating environment marked by heightened competition and the challenges of aggressively expanding into new markets, in addition to Avon's recent history of debt financed acquisitions, the agency said.

Avon's A2 long-term rating reflects its 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 in recent years, the agency added.

The ratings are constrained by the company's relatively modest scale for a consumer products company, limited product diversification, recent weakness in mature and developed markets such as the United States, Moody's said.

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