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.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews