April 8 Avon Products Inc said on Monday
it will slash more than 400 jobs and exit the Irish market, the
latest moves in the new chief executive's plan to return the
beauty products company to profitability in the next two years.
Avon shares dipped 0.2 percent to $20.21 in early Monday
Avon, the world's largest direct seller of cosmetics, is
already showing signs of stabilizing its business under new CEO
Sheri McCoy, who was brought in a year ago, following years of
inconsistent sales in Brazil and Russia and dwindling business
in China and the United States.
The company, known for products such as Skin So Soft, in
December set an annual cost savings target of $400 million by
the end of 2015 and said it would exit South Korea and Vietnam.
The moves announced Monday are part of those initiatives.
In February, Avon reported surprisingly strong
fourth-quarter earnings after reversing sales declines in top
markets like Brazil and Russia and selling more products
McCoy said at an investor conference later that month in her
most expansive comments about the restructuring plan that she
had no qualms about exiting unprofitable markets to focus on
emerging markets. She said a key priority is to reverse a long
sales slide in the United State.
The CEO also wants operating profit margin to hit the low
teens in percentage terms by 2016. In 2012, it had fallen to 2.9
percent of sales from 9.9 percent two years earlier.
"While considerable work remains to be done to improve
operating margin, we believe Avon can return to a low
double-digit margin," Stifel analyst Mark Astrachan said.
Staff will be cut across all regions and functions and will
include the restructuring or closing of smaller, underperforming
markets, primarily in Europe, the Middle East and Africa, Avon
said on Monday.
The cuts, which will be completed by the end of the year,
are expected to generate $45 million to $50 million in annual
Total charges are expected to range from $35 million to $40
million, with about $20 million coming in the first quarter of
2013, the company said.
Avon had 39,100 employees as of Dec. 31, 2012, and more than
six million active sales representatives.