Going ahead with its previously announced $400 million cost
saving initiative, the troubled beauty company,
Avon Products Inc.
) yesterday announced that it will lay off another 600 employees
globally. At the end of 2013, the company had 36,700 employees
working worldwide. This action includes job cuts in the North
America business unit and eliminating positions in the corporate
Overall, the company expects to incur net charges of nearly
$45-$50 million (before tax) from these initiatives, of which $40
million is likely to be recorded in the second quarter of 2014.
Annualized cost synergies arising from the initiative are expected
to range between $50 and $55 million before tax, contributing
significantly to the company's cost-savings target of $400 million
by the end of 2016.
This is the fourth time the company has made layoffs since the
announcement of its cost saving initiative in Nov 2012. Until now,
the company had cut about 1,500 jobs in Dec 2012, 400 jobs in Apr
2013 and 650 positions in Dec 2013. Simultaneously, the company
ceased its operations in the underperforming markets of South
Korea, Vietnam and Ireland.
Apart from this, the door-to-door cosmetics seller, in Dec 2013
stopped the global rollout of the software supplied by
) under its SMT project after it failed to impress the company's
sales representatives in Canada. The SMT project, launched in 2009,
was designed to enhance the company's order management system and
facilitate communication with its sales persons.
Further, the company expects that including the recent job cuts,
it will realize approximately $240 million to $250 million of
annualized savings (before tax) through the restructuring actions
taken so far.
Avon's strategic measures formulated in Nov 2012 are focused on
accelerating top-line growth, trimming costs and improving working
capital to revive the company from ongoing challenges. Management
is in the process of easing business issues and directing the
company toward higher growth, thereby restoring its competitive
position among peers like
The challenges faced by this Zacks Rank #5 (Strong Sell) company
were reflected in its first-quarter 2014 financial results. The
company's earnings of 12 cents per share in the quarter declined
nearly 54% year over year and missed the Zacks Consensus Estimate
of 20 cents primarily due to weak top-line performance.
Total revenue dropped more than 11% year over year to $2,183.6
million and fell short of the Zacks Consensus Estimate of $2,240.0
million primarily due to loss of active representatives, declining
volume and unfavorable foreign currency translations.
The shares of this direct selling beauty products company fell
nearly 1.7% in yesterday's trading session and closed trade at
$14.69. So far in the year, shares have plunged approximately
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