New State-of-the Art Distribution Center To Open In 2009
NEW YORK, Jan. 9 /PRNewswire-FirstCall/ -- Avon Products, Inc. (NYSE:
AVP) today announced plans to restructure its U.S. distribution operations
to enhance service to its Representatives, improve operating efficiencies
through new technologies, and achieve other cost savings that can be
reinvested in business growth.
The initiative, which is part of the company's previously announced
multi-year turnaround plan, includes the building of a state-of-the-art
distribution center in the Midwest that will open in 2009. The facility
will employ in the range of 500 people when fully operational and will have
capacity to ship 50% of U.S. sales volume.
Avon also said that it will phase-out its current distribution branches
in Newark, Delaware, and Glenview, Illinois, with the closures expected to
be completed by mid-2009 and mid-2010, respectively, with a combined loss
of approximately 620 positions.
Avon said that it expects to invest approximately $150 million in
capital expenditures relating to the new distribution center and for
technology and equipment upgrades in other branches. The company plans to
upgrade and modernize its Atlanta-based distribution center, and is
evaluating options for investing in a new warehouse management system for
the Pasadena site.
In addition, Avon said that it expects to record approximately $20
million of charges relating to the restructuring of U.S. distribution in
the fourth quarter 2006 for employee-related costs. The company said that
it will incur additional expenses totaling approximately $65 million over
the next several years, including transition costs and accelerated
depreciation on equipment. In addition, Avon expects a net gain of
approximately $25 million from the sales of the Newark and Glenview
facilities at the end of the project period.
Once the initiative is fully implemented, the company expects to
achieve annualized cost savings of approximately $35 million to $45
million, as well as incremental benefits to working capital and improved
service to Avon Representatives. The cost savings are part of the company's
previously announced multi-year restructuring plan.
"With these actions, we are transforming our U.S. distribution network,
cost structure, and operating effectiveness as we continue to lay the
foundation for Avon's return to sustainable growth," said Elizabeth A.
Smith, Executive Vice President and President, North America and Global
Marketing. "Our decision to restructure U.S. distribution will deliver a
step-change in technology support for operations and also will enable a
significant improvement in service to our U.S. Representatives," she added.
Avon said that it is in the process of evaluating potential locations
for its new distribution center in the Midwest, with a decision expected to
be announced in 2007. The company said that it expects the new distribution
center to feature advanced picking technology to improve productivity and
order accuracy, in addition to automated systems that will streamline
process and work flow.
"The decision to phase-out our branches in Newark and Glenview was a
difficult one, and the lengthy transition timelines will help support our
hard-working and dedicated Associates as they plan the next phase of their
careers," Smith said. "We are confident that the actions we are taking are
the right long-term decisions for our business and our Representatives as
we fortify our leadership in direct selling."
Avon continues to project that the total cost to implement all of its
restructuring initiatives will be in the range of $500 million and that the
annualized restructuring savings will exceed $300 million when the plan is
fully realized.
Avon, the company for women, is a leading global beauty company, with
over $8 billion in annual revenue. As the world's largest direct seller,
Avon markets to women in well over 100 countries through over five million
independent Avon Sales Representatives. Avon's product line includes beauty
products, fashion jewelry and apparel, and features such well-recognized
brand names as Avon Color, Anew, Skin-So-Soft, Avon Solutions, Advance
Techniques, Avon Naturals, Mark, and Avon Wellness. 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," "plan,"
"believe," "expect," "anticipate," "intend," "planned," "potential" 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 our global business
strategy, including our multi-year restructuring initiatives, product
mix and pricing strategies, enterprise resource planning, customer
service initiatives, product line simplification, strategic sourcing
initiative, and cash management, tax, foreign currency hedging and risk
management strategies, and our ability to achieve anticipated benefits
from such initiatives;
* the possibility of business disruption in connection with our multi-year
restructuring initiatives;
* the costs associated with our product line simplification program;
* our ability to achieve growth objectives, particularly in our largest
markets and new and emerging markets;
* our ability to replace lost sales attributable to the repositioning of
the Beauty Plus and Beyond Beauty business in the United States;
* our ability to successfully identify new business opportunities and
acquisition candidates, and our ability 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 and our
ability to operate using the direct-selling model permitted in that
market;
* the impact of substantial currency fluctuations on the results of our
foreign operations;
* general economic and business conditions in our markets, including
social, economic and political uncertainties in Latin America, Asia
Pacific, Central and Eastern Europe and the Middle East;
* the possible impact of the new importation laws for ethanol-based
products in Russia;
* a general economic downturn, 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 quality, safety and efficacy of our products;
* 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 increase Representative
productivity, and to compete with other direct-selling organizations to
recruit, retain and service Representatives;
* the impact of 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 access to financing; and
* the impact of possible pension funding obligations and increased pension
expense 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, 2005,
filed with the U.S. Securities and Exchange Commission. We undertake no
obligation to update any such forward-looking statements.
SOURCE Avon Products, Inc.
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Related links:
http://www.avoncompany.com
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CONTACT:
Media: In New York, NY: Victor Beaudet,
+1-212-282-5344, in Newark, DE: Sharon Samuel, +1-302-453-7650,
or In Glenview, IL: Jennifer Vargas, +1-847-470-5765; or
Investors: Renee Johansen or Rob Foresti, +1-212-282-5320, all
for Avon Products, Inc.
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