The distressed global beauty company,
Avon Products Inc.
), has moved ahead with its previously announced target of
bringing down costs by $400 million through 2015. As the first
move in this direction, the company has laid down plans to cut
about 1,500 jobs globally and cease operations in the South Korea
and Vietnam markets.
AVON PRODS INC (AVP): Free Stock Analysis
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Management believes these actions should help streamline
operations by improving focus on high priority markets and
activities, as well as enhance efficiencies. The company expects
these targets to be achieved by the end of 2013.
Avon anticipates the latest turnaround initiatives to incur costs
in the $80 - $90 million (before taxes) range, of which about $50
- $60 million would be accounted in the fourth quarter of 2012.
These initial cost saving measures are expected to make for about
20% of the total planned savings over the next three years.
In November, Avon outlined some strategic measures focused on
accelerating top-line growth, trimming down costs and bettering
working capital. Management is in the process of easing business
issues and directing the company towards the growth trajectory,
bringing back its competitive position among peers like
As part of its strategy, the company, in November, slashed its
quarterly dividend by 6 cents per share to 23 cents per share.
Management believes this reduction in dividend, coupled with
efforts to improve working capital should ease the financial
burden on the company.
Of late, Avon has been encountering challenges on various fronts.
Last month, Avon posted lower-than-expected sales and earnings
results for the third quarter of 2012, marking the sixth
consecutive quarter of dismal performance. The company's adjusted
earnings per share dipped 55.2% year over year to 17 cents and
also fell short of the Zacks Consensus Estimate of 23 cents per
Total revenue declined 7.7% year over year to $2,550.9 million
compared with $2,762.4 million a year ago. Moreover, total
revenue missed the Zacks Consensus Estimate of $2,591 million.
Avon currently retains a Zacks #5 Rank that translates into a
short-term Strong Sell rating. Moreover, we maintain our
long-term Underperform recommendation on the stock, until the
endeavors undertaken to regain the lost momentum, show some