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Avon Eliminates 600 Positions

The cutbacks are principally in the company's corporate organization and North American business unit.

Avon Products Inc.’s ongoing $400 million cost-cutting program will result in the elimination of another 600 positions, principally in its corporate organization and North American business unit.

Avon expects to record related charges of $45 million to $50 million before taxes, with about $40 million of the sum to be recorded during the second quarter of 2014. The cutbacks should result in annual savings of $50 million to $55 million.

The downsizing is part of the Cost Savings Initiative put forth by the company following the appointment of Sheri McCoy as chief executive officer in April 2012 and is expected to result in a total global head count reduction of 1,500 jobs as part of “an effort to stabilize the business and return Avon to sustainable growth.”

The new round of cuts is similar in size and scope to others made last December when about 650 posts, principally in North America, were eliminated.

With the reductions made to date, Avon believes it has made cuts that will translate into between $240 million and $250 million in annualized pretax savings.

In its last annual report, filed in late February, Avon said it had 36,700 employees, 4,300 of them in the U.S. The firm’s sales representatives operate independently and aren’t included in corporate head count figures.

The Avon fiscal diet has also seen it undertake the “restructuring or closure of certain smaller, underperforming markets,” including its businesses in South Korea, Vietnam and Ireland. Separately, Avon’s business in France entered receivership in January.

Last July, the company sold its Silpada Designs jewelry business to Rhinestone Holdings for $85 million in cash and potential earn-outs of another $15 million if earnings targets are met over a two-year time frame. It also reached an agreement with onetime suitor Coty Inc. for Avon’s reps in Brazil to sell Coty’s fragrances in that market.

As it’s reorganized, Avon has also labored to resolve a dispute with the Department of Justice involving alleged violations of the Foreign Corrupt Practices Act connected to its business in China. Under terms of an agreement reached last month, Avon would pay $135 million in fines but not face criminal charges.

In the first quarter, Avon’s net loss grew to $186.3 million from a loss of $13.7 million in the prior-year period, and revenues declined 11 percent to $2.18 billion and were down 3 percent when the effects of currency translation are excluded. Sales were $11.1 billion in 2011 before slipping to $10.56 billion in 2012 and $9.96 billion last year. Meanwhile, a $513.6 million profit in 2011 gave way to a $42.5 million loss in 2012 and a $56.4 million loss last year, including restructuring and other charges.

Wall Street hasn’t been impressed by the attempts to “right-size” Avon. Word of the most recent cuts came after the markets closed Monday.

“Wall Street is frustrated, rightly so, because we aren’t growing and we have some profitability challenges,” McCoy said at the WWD Beauty CEO Summit last month. “If we look at growth, it’s all coming outside the U.S. But our goal is get the U.S. stable, look at how we learn from that because it is a developed market and we need to understand direct selling in a developed market.”