By Jessica Wohl

U.S. regulators are formally investigating whether Avon broke bribery laws overseas, and the cosmetics company said it was again reassessing its strategy after quarterly profit fell far short of expectations.

Shares of Avon fell as much as 19.6 percent on Thursday, as analysts blasted Chairman and CEO Andrea Jung and questioned whether she and her team can come up with a turnaround plan as quickly as they hope to.

Analysts took longtime leader Jung to task during Avon's quarterly conference call, as they have in prior quarters.

"Why should investors believe management and the board have any control over the business at this point?" asked Stifel Nicolaus' Mark Astrachan, who downgraded Avon to "hold."

"Look, the buck stops with me," replied Jung, who has been chief executive officer since 1999 and chairman since 2001.

U.S. regulators also subpoenaed Avon Products Inc over its contact with analysts and others as part of an investigation related to fair disclosure under Regulation FD.

Under Jung, Avon has turned in poor performances in key markets such as Brazil and Russia, poured tens of millions of dollars into its international bribery investigation and struggled to stem declines in a sluggish U.S. market.

New York-based Avon does most of its business outside North America. Other markets accounted for nearly 82.2 percent of revenue and 98.4 percent of profit in the third quarter.

The world's largest direct seller of cosmetics, which has been celebrating its 125th anniversary with celebrity-studded events this year, now plans to assess long-range business plans and give an update during the first quarter of 2012.

"It strikes me that you guys are so totally screwed up, in so many ways, the change has to be radical," said Citigroup analyst Wendy Nicholson, who noted that a first-quarter meeting may not give Avon enough time for a comprehensive review.

She also questioned whether Avon would consider other steps, including hiring consultants, exiting another market as it exited Japan or possibly taking the company private.

Avon could be a target for a private equity firm in the future, but for now the investigation is too risky for any buyer to take a look at it, consumer industry bankers said.

"Everything is part of the overall business review," said Charles Cramb, vice chairman of the developed market group and interim chief finance officer.

Another potential red flag is that Avon cannot fully fund its dividend with free cash flow. The payout was raised to a quarterly rate of 23 cents per share earlier this year.

Avon has had "disappointing" cash management as well as one-time cash outlays, said Cramb, who will end his six years as Avon's CFO at the end of November.

Avon's incoming CFO, Kimberly Ross of Royal Ahold, will be involved in the review, Jung said.

Avon changed its corporate structure and shook up management in February. It overhauled operations and cut thousands of jobs under a restructuring laid out in November 2005 and updated in February 2009, and eliminated the dual role of president and chief operating officer in 2006, leaving business units to report directly to Jung.

Avon shares were down 17.7 percent at $18.93 on Thursday afternoon. Nearly $2 billion of Avon's market capitalization was wiped out when shares fell to $18.51 earlier in the session. The shares had fallen 20.8 percent from the beginning of the year through Wednesday.

SEC PROBE

Avon said on Thursday that it received the subpoena from the U.S. Securities and Exchange Commission on Wednesday. The SEC is investigating the company's contact during 2010 and 2011 with certain analysts and other representatives of the financial community, Avon said in its quarterly filing.

The SEC adopted Regulation FD, short for "fair disclosure," in 2000 to prevent companies from tipping off analysts and investors about material information.

The SEC issued a formal order of investigation of both Regulation FD matters and the Foreign Corrupt Practices Act matter that Avon itself has been looking at since June 2008.

Avon said it could not say how long the investigations may take or what the consequences might be.

Meanwhile, Avon blamed disappointing results in Brazil on poor implementation of an "unforgiving" new computer system and said tough economic conditions in several areas crimped sales.

The company -- which does not issue quarterly earnings forecasts -- no longer expects to meet its 2011 goals of mid-single digit revenue growth or a 0.5 percentage point to 0.7 percentage point improvement in operating margin.

"The CEO is responsible for the overall outcome of a company, and she has to be under pressure with these results," said Bernstein analyst Ali Dibadj. "It would be unfair to shareholders if there weren't pressure on management at this point."

Jung, a magna cum laude graduate of Princeton University, was ranked sixth on Fortune magazine's list of powerful women in U.S. business in September.

She co-leads the seven-member board at Apple Inc and chairs its compensation committee. When announcing her nomination to Apple's board in 2008, Steve Jobs referred to Jung as a "strong CEO and marketer."

She has also served on General Electric Co's board since 1998 and serves on two of its committees: nominating and corporate governance and management development and compensation. A GE spokesman said the company is not reviewing her position as a director, while an Apple spokesman did not immediately return a call for comment.

Avon's third-quarter profit fell to $164.2 million, or 38 cents per share, from $166.7 million, or 38 cents a share, a year earlier. Revenue rose 5.7 percent to $2.76 billion.

The results missed Wall Street estimates of earnings of 46 cents per share and revenue of $2.83 billion, according to Thomson Reuters I/B/E/S.

Avon also sold 5 percent fewer products in the quarter. In North America, sales continued to slide as more sales representatives left, and operating profit fell 85 percent.

Avon option volume was heavy, running 14.8 times the norm with some apparently looking for a long-term rebound in shares by picking up January 2013 $20 calls.

(Reporting by Jessica Wohl in Chicago; Additional reporting by Brad Dorfman and Doris Frankel in Chicago, Phil Wahba and Jonathan Stempel in New York, Jessica Hall in Philadelphia, Scott Malone in Boston and Poornima Gupta in San Francisco; editing by Dave Zimmerman, Lisa Von Ahn and Matthew Lewis)