By  on February 16, 2007

NEW YORK — Avon's turnaround plan is working, slowly but surely.

That was the underlying message delivered to analysts at the company's investor meeting Thursday.

Andrea Jung, Avon's chairman and chief executive officer, said, "We are seeing strong paybacks from our investments to drive growth, and in 2007 we will again invest in the business at accelerated levels."

The goal of the turnaround effort, she reiterated, was to drive sustainable growth. She credited the turnaround plan with fueling revenue growth by 8 percent, to $8.76 billion in 2006 from $8.15 billion in the prior year.

Throughout 2006, Avon increased its advertising spending by 83 percent, to $249 million; while at the same time it embarked on a string of cost-cutting initiatives, including "delayering" top management ranks, streamlining the U.S. distribution network and reducing stockkeeping units through its Product Line Simplification program and Strategic Sourcing Initiative. Avon originally projected the overall restructuring effort would cost approximately $500 million, but would produce annual savings of more than $300 million by 2009.

On Thursday, the direct-seller said it expected annualized benefits from the last two initiatives, dubbed PLS and SSI, to exceed $400 million in savings, which would bump Avon's total restructuring savings to over $700 million, up from the expected $300 million.

Avon said it planned to funnel those savings into advertising support and investment in its direct sales force.

On the brand-building front, next month Avon plans to launch its first global advertising campaign. The effort, with the tag line "Hello Tomorrow," is designed to speak to consumers with one personality and one look in multiple mediums, including outdoor advertising, television and print ads, the Web and recruiting materials. The campaign, which includes recruitment ads, will bring Avon's total advertising spend to $340 million in 2007.

Jung also declared that driving beauty share gains was a major focus this year. To that end, Avon tapped celebrity makeup artist Jillian Dempsey to overhaul its core color cosmetics franchise. It also linked arms with designer Cynthia Rowley to create a color cosmetics collection, slated to bow this fall (see related story on page 11). Jung said Avon would continue to pursue similar alliances with designers and celebrities to sharpen its fashion edge in the cosmetics category.Other upcoming issues include introducing a gift card for Mother's Day to tap the $85 billion gift-card industry and free online training for Avon representatives.

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