Avon files for bankruptcy after hundreds of lawsuits over cancer claims and drowning in $1.3 billion debt

AVON Products Inc has filed for bankruptcy after multiple lawsuits and financial struggles.

The cosmetics company submitted its Chapter 11 filing in a Delaware court on Monday.

While known by many consumers for its door-to-door saleswomen and a vast array of products, Avon faced hundreds of lawsuits claiming that talc in some of its merchandise had cancer-causing properties, per Bloomberg Law.

At least 386 talc-related suits have been filed against the brand over the past few years, and Avon intends to address those claims with the bankruptcy filing.

The talc cases resulted in about $225 million in expenses for legal defense costs and settlement payments.

Philip Gund, chief restructuring officer for Avon, said in the court filings that the company no longer has "sufficient liquidity to litigate an/or settle" any other cases.

Gund added that Avon expects the number of lawsuits to "only increase absent a permanent solution."

The brand also has at least $1.3 billion in debt, most of which is owed to Natura & Co, a Brazil-based cosmetics company it acquired in 2020, per court documents.

Avon hasn't operated in the United States since 2016, when it divested its entire North American business, but it remains the holding company of several entities internationally.

Those entities continue to operate as usual and aren't part of Monday's bankruptcy filing.

SAVING GRACE

Natura & Co agreed to purchase the ownership share of Avon's international operations for $125 million through a credit bid, but nothing will be confirmed until there's a court-sanctioned auction, per a press release.

It would also dismiss the around $530 million Avon owes, and put up another $43 million for Avon as debtor-in-possession financing during the Chapter 11 proceedings, pending court approval.

Avon's newly-appointed CEO Kristof Neirynck said the company would move forward through the bankruptcy to keep its attention on international markets.

"We remain focused on advancing our business strategy internationally, including modernizing our direct selling model and reigniting the brand to accelerate growth," Neirynck said in the release.

"Since becoming CEO earlier this year, I am increasingly energized by our strengths and opportunities, supported by our valued Associates and nearly 2 million Representatives around the world."

Avon's bankruptcy filing comes amid several from various retailers and restaurant companies across the United States this summer.

Today's action the proposed sale of Avon's non-U.S. operations will maximize the value of our assets and enable us to address our obligations in an orderly manner.

GONE FOR GOOD

Conn's Home Plus, a century-old furniture and electronics retailer, submitted its Chapter 11 filing in July.

It confirmed that it would close all 170 of its stores, with 70 shutting down over the next few months.

Several other brands under its umbrella — including Badcock Home Furniture & More, will also shut down locations.

A few fashion brands also shocked some customers with bankruptcy announcements this spring, followed by mass closures.

Express filed for Chapter 11 back in April, with at least 100 stores axed.

It was soon followed by Rue21, which had filed for bankruptcy before in the early 2000s, but confirmed it would be closing all of its over 500 stores this time around.