Avon Products Inc. is cutting 2,500 jobs as part of a previously released reorganization strategy and moving its operational headquarters to the United Kingdom now that the spinoff of its North America operations has been completed.
The moves are part of the group’s three-year transformation plan. Of the job cuts, 1,700 will come this year and will include open and filled positions, according to the company. The cuts equal about 7 percent of Avon’s workforce. Avon’s official headquarters will remain in New York, where it has facilities in Suffern and Rye. The company will remain quoted on the New York Stock Exchange.
The beauty firm did not reveal details of when the remaining 800 jobs would be lost.
Avon is “trying to move [its] operations…closer to where the actual business takes place,” said a spokeswoman. The company closed the spinoff of its North America business to private-equity company Cerberus Capital Management LP earlier this month. Cerberus took over the business as part of a strategic partnership with Avon that included a $435 million investment for a 16.6 percent stake in Avon Products, plus $170 million for an 80 percent stake in New Avon LLC (the North America business). Avon Products still owns 20 percent of New Avon.
“We are taking another important step forward in the execution of Avon’s transformation plan,” said chief executive officer Sheri McCoy. “With the recent completion of the sale of the North American business, our commercial operations are now fully outside of the United States, allowing us to dramatically rethink our operating model. The actions we are taking today will bring our corporate and commercial businesses closer together, which will drive efficiencies, improve operational effectiveness and deliver significant cost savings.”
Avon unveiled a three-year, $350 million cost-cutting plan at its investor day in January. On Monday, the company said it expects $30 million in pre-tax savings from cutting 1,700 jobs, and anticipates annualized pre-tax savings of between $65 million and $70 million starting in 2017. Avon expects to realize pre-tax savings of $20 million on an annualized basis from elimination of open positions.
When Avon released the plan, it said it would cut about $150 million from the company’s operating model and $200 million from its supply chain. The company also said it would explore alternatives for its China business, where Avon has struggled, as well as operations in other under-performing markets.
The company revealed its 16th straight quarter of sales declines with its fourth quarter earnings in February. Avon’s revenue fell 20 percent to $1.6 billion, with a net loss of $333 million for the quarter.