AVON Products Inc. has declared bankruptcy following numerous lawsuits and financial difficulties.
The cosmetics company filed for Chapter 11 protection in a Delaware court on Monday.
Known for its direct sales model and diverse product line, Avon has been hit by hundreds of lawsuits alleging that the talc in some of its products causes cancer, according to Bloomberg Law.
Over the past few years, the company has faced at least 386 such lawsuits, resulting in around $225 million in legal and settlement costs. Avon plans to address these claims through the bankruptcy process.
Philip Gund, Avon’s chief restructuring officer, stated that the company lacks the financial resources to handle or settle additional cases and anticipates that the number of lawsuits will continue to rise without a permanent solution.
Avon is also burdened with approximately $1.3 billion in debt, primarily owed to Natura & Co, a Brazilian cosmetics company it acquired in 2020.
Although Avon ceased operations in the U.S. in 2016 by selling its North American business, it still manages several international entities that are not part of the bankruptcy filing.
Natura & Co has proposed purchasing Avon’s international operations for $125 million via a credit bid, contingent upon a court-sanctioned auction.
This deal would also cancel around $530 million of Avon’s debt and provide an additional $43 million in financing during the Chapter 11 process, pending court approval.
Avon’s new CEO, Kristof Neirynck, emphasized the company’s focus on international markets and plans to modernize its direct selling model to spur growth.
Neirynck expressed optimism about Avon’s potential, supported by its global Associates and nearly 2 million Representatives.
Avon’s filing is part of a broader trend this summer of retailers and restaurants across the U.S. seeking bankruptcy protection.
In related news, Conn’s Home Plus, a furniture and electronics retailer, filed for Chapter 11 in July and announced the closure of all 170 stores, with 70 shutting down soon.
Other brands under Conn’s, such as Badcock Home Furniture & More, will also close locations.
Additionally, several fashion brands, including Express and Rue21, have recently filed for bankruptcy and are closing.
