More Cuts at Avon

The grim news out of Avon just keeps on coming. The company provided additional details on the execution of its three-year transformation plan that was outlined at the Investor Day in January.

“Today, we are taking another important step forward in the execution of Avon's transformation plan. 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,” said Sheri McCoy, chief executive officer. “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 is implementing significant changes in its operating model, including:


• Revising Avon's commercial business to ensure that all markets have consistent roles, responsibilities and processes. This will drive significant cost efficiencies and improved effectiveness.


• Further streamlining of Avon's corporate functions to align with the current and future needs of the business. The company will reduce corporate infrastructure and will transition, over time, the location of Avon's corporate headquarters to the United Kingdom, where it has significant commercial operations. To realize benefits of scale, core enterprise functions will be located in the United Kingdom with direct connection to the operations throughout the world.


As a result of these operating model changes, Avon will reduce its headcount by approximately 2,500 positions across multiple geographies. This includes both filled and open positions.


The company expects to record total charges associated with these actions of approximately $60 million before taxes in the first quarter of 2016. These charges are expected to be comprised primarily of employee-related costs. The company expects to realize pre-tax savings of approximately $30 million in 2016 associated with an approximate 1,700 headcount reduction, and expects to achieve annualized pre-tax savings of approximately $65-70 million beginning in 2017. In addition, Avon expects to realize annualized pre-tax savings of approximately $20 million in 2016 related to the elimination of the open positions.


Avon will maintain its current facilities in Suffern, NY and Rye, NY. The company will also continue to be incorporated in New York and trade on the New York Stock Exchange under the symbol AVP.


As announced previously, Avon separated its North American business into a privately-held company in which Avon maintains a minority interest. The North American business is not impacted by any of these most recent actions.