Avon Expects Savings and Benefits Approaching $900 Million From Original Restructuring, Product Line Simplification and Strategi
February 19 2009 - 7:32AM
PR Newswire (US)
Avon Also Announces a New Restructuring Program Targeting Savings
of Approximately $200 Million; Costs to Implement Expected to be in
Range of $300-$400 Million NEW YORK, Feb 19 /PRNewswire-FirstCall/
-- Avon Products, Inc. (NYSE:AVP) today announced that it now
expects to achieve higher-than-anticipated annualized savings and
benefits approaching $900 million from its original restructuring
program and its product line simplification and strategic sourcing
initiatives. The company also announced a new restructuring program
targeting annualized savings of approximately $200 million when
fully implemented. Charles Cramb, Avon's Vice Chairman, Chief
Finance and Strategy Officer, said, "Our original restructuring
program began in 2005, and over the last three years we have been
dramatically transforming our cost structure and exceeding our
original savings estimates as we fix the fundamentals of our
business. Based on this progress, we expect the original
restructuring program to deliver total savings of approximately
$430 million by 2011-2012. We also expect to realize annualized
benefits from our product line simplification and strategic
sourcing initiatives in excess of $200 million and $250 million,
respectively, in 2010. "Fueled by this success, we're also
announcing that Avon will launch a new restructuring program that
will target increasing levels of efficiency and organizational
effectiveness across our global operations," Mr. Cramb said. "This
reflects both our constant turnaround mentality and our
determination to aggressively manage our cost structure as we
address the current macro-economic challenges." Avon said that the
new restructuring program will focus on the company's global supply
chain operations, realigning certain local business support
functions to a more regional basis to drive increased efficiencies,
and streamlining transaction-related services, including selective
outsourcing. Further details will be announced when initiatives are
finalized. The company also noted that the new restructuring
program is targeted to achieve annualized savings of approximately
$200 million upon full implementation by 2012-2013. Avon also said
that the costs to implement the upcoming initiatives are expected
to be in the range of $300-$400 million, with implementation
anticipated to start in the second half of 2009. Avon, the company
for women, is a leading global beauty company, with over $10
billion in annual revenue. As the world's largest direct seller,
Avon markets to women in more than 100 countries through 5.8
million independent Avon Sales Representatives. Avon's product line
includes beauty products as well as fashion and home products, and
features such well-recognized brand names as Avon Color, Anew,
Skin-So-Soft, Advance Techniques, Avon Naturals, and Mark. Learn
more about Avon and its products at http://www.avoncompany.com/.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this release that are not historical facts or
information are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as
"estimate," "project," "forecast," "plan," "believe," "may,"
"expect," "anticipate," "intend," "planned," "potential," "can,"
"expectation" and similar expressions, or the negative of those
expressions, may identify forward-looking statements. Such
forward-looking statements are based on management's reasonable
current assumptions and expectations. Such forward-looking
statements involve risks, uncertainties and other factors, which
may cause the actual results, levels of activity, performance or
achievement of Avon to be materially different from any future
results expressed or implied by such forward-looking statements,
and there can be no assurance that actual results will not differ
materially from management's expectations. Such factors include,
among others, the following: -- our ability to implement the key
initiatives of and realize the operating margins and projected
benefits (in the amounts and time schedules we expect) from our
global business strategy, including our multi-year restructuring
initiatives, product mix and pricing strategies, enterprise
resource planning, customer service initiatives, product line
simplification program, sales and operation planning process,
strategic sourcing initiative, outsourcing strategies,
zero-overhead-growth philosophy, cash flow from operations and cash
management, tax, foreign currency hedging and risk management
strategies; -- our ability to realize the anticipated benefits
(including any projections concerning future revenue and operating
margin increases) from our multi-year restructuring initiatives or
other strategic initiatives on the time schedules or in the amounts
that we expect, and our plans to invest these anticipated benefits
ahead of future growth; -- the possibility of business disruption
in connection with our multi-year restructuring initiatives or
other strategic initiatives; -- our ability to realize sustainable
growth from our investments in our brand and the direct-selling
channel; -- a general economic downturn, a recession globally or in
one or more of our geographic regions, such as North America, or
sudden disruption in business conditions, and the ability of our
broad-based geographic portfolio to withstand such economic
downturn, recession or conditions; -- the inventory obsolescence
and other costs associated with our product line simplification
program; -- our ability to effectively implement initiatives to
reduce inventory levels in the time period and in the amounts we
expect; -- our ability to achieve growth objectives or maintain
rates of growth, particularly in our largest markets and developing
and emerging markets; -- our ability to successfully identify new
business opportunities and identify and analyze acquisition
candidates, and our ability to negotiate and consummate
acquisitions as well as to successfully integrate or manage any
acquired business; -- the effect of political, legal and regulatory
risks, as well as foreign exchange or other restrictions, imposed
on us, our operations or our Representatives by governmental
entities; -- our ability to successfully transition our business in
China in connection with the resumption of direct selling in that
market in 2006, our ability to operate using the direct-selling
model permitted in that market and our ability to retain and
increase the number of Active Representatives there over a
sustained period of time; -- the effect of economic factors,
including inflation and fluctuations in interest rates and currency
exchange rates, and the potential effect of such fluctuations on
our business, results of operations and financial condition; --
general economic and business conditions in our markets, including
social, economic and political uncertainties in the international
markets in our portfolio; -- any consequences of the internal
investigation of our China operations; -- information technology
systems outages, disruption in our supply chain or manufacturing
and distribution operations, or other sudden disruption in business
operations beyond our control as a result of events such as acts of
terrorism or war, natural disasters, pandemic situations and large
scale power outages; -- the risk of product or ingredient shortages
resulting from our concentration of sourcing in fewer suppliers; --
the quality, safety and efficacy of our products; -- the success of
our research and development activities; -- our ability to attract
and retain key personnel and executives; -- competitive
uncertainties in our markets, including competition from companies
in the cosmetics, fragrances, skin care and toiletries industry,
some of which are larger than we are and have greater resources; --
our ability to implement our Sales Leadership program globally, to
generate Representative activity, to enhance the Representative
experience and increase Representative productivity through
investments in the direct-selling channel, and to compete with
other direct-selling organizations to recruit, retain and service
Representatives; -- the impact of the seasonal nature of our
business, adverse effect of rising energy, commodity and raw
material prices, changes in market trends, purchasing habits of our
consumers and changes in consumer preferences, particularly given
the global nature of our business and the conduct of our business
in primarily one channel; -- our ability to protect our
intellectual property rights; -- the risk of an adverse outcome in
our material pending and future litigations; -- our ratings and our
access to financing and ability to secure financing at attractive
rates; and -- the impact of possible pension funding obligations,
increased pension expense and any changes in pension regulations or
interpretations thereof on our cash flow and results of operations.
Additional information identifying such factors is contained in
Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2007, and our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008, filed with the U.S. Securities
and Exchange Commission. We undertake no obligation to update any
such forward-looking statements. DATASOURCE: Avon Products, Inc.
CONTACT: Media, Sharon Samuel, +1-212-282-5322, or Jennifer Vargas,
+1-212-282-5404, or Investors, Renee Johansen or Anita Bialkowska,
+1-212-282-5320 Web Site: http://www.avon.com/
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