UPDATE:Avon Unveils More Restructuring; Sees Added $200 Million Savings
20 February 2009 - 4:32AM
Dow Jones News
Avon Products Inc. (AVP) unveiled another round of streamlining,
disclosing plans to cut another $200 million in costs as the
cosmetics company continues its years-long restructuring.
The new restructuring program will cut 2,500 to 3,000 jobs,
including existing vacancies, globally over the next four
years.
The original effort, begun in 2005, is expected to result in
annual savings of about $430 million by 2011-2012, with about
another $450 million expected to be saved beginning in 2010 -- $200
million from product-line simplification and $250 million from
"strategic sourcing initiatives," pushing the total from the
previously announced restructuring moves to nearly $900 million a
year, above prior expectations.
Thursday's announcement will add to that amount by $200 million
by 2012-2013 as the company implements a new program focusing on
its global supply chain operations and realignment of certain local
business support functions. The move is expected to cost Avon $300
million to $400 million to implement.
"We will continue our constant turnaround mentality," Charles
Cramb, vice chairman, chief finance and strategy officer said
Thursday at the Consumer Analyst Group of New York Conference held
in Boca Raton, Fla. "We are constantly challenging everything we do
-- what, how and where."
Separately, the company announced initiatives for 2009 that
include freezing the number of positions and worldwide salaries,
with exceptions for labor agreements and high-inflation markets.
The company is also reducing costs beyond compensation, with a
targeted 35% reduction in travel and entertainment expenses.
To appeal to a more budget-conscious consumer, Avon said it will
add more emphasis to its "smart value products." Those products
generally sell for around $5, according to one analyst. However,
the beauty company said its not backing off its "strategic
pricing."
"Our broad product assortment at all price tiers allows us to
rebalance our product mix as consumers need a shift," said Chairman
and Chief Executive Andrea Jung.
The company is also boosting its recruiting efforts during the
recession, shifting its advertising investment there from 10% to
20%, with the hopes of attracting some women who may be out of work
in the current economy.
"In 2009, we are making the boldest recruiting statement ever,"
Jung said.
Earlier this month, Avon said fourth-quarter net income rose 80%
amid year-earlier restructuring charges as revenue fell on the
stronger dollar and weaker volume.
At that time,Chief Executive Jung said "it is prudent" to assume
this year will be "challenging."
Shares of Avon were recently trading at 19.54, down 28 cents, or
about 1.4%.
-By Kelly Nolan; Dow Jones Newswires; 201-938-4049;
kelly.nolan@dowjones.com
(Katherine E. Wegert contributed to this story.)