Program Expected to Cost in the Range of $500 Million;
Annual Savings Estimated at Over $300 Million
NEW YORK, Feb. 24 /PRNewswire-FirstCall/ -- Avon Products, Inc.
(NYSE: AVP) today said that the cost to implement its multi-year, four-part
turnaround plan would be at the high end of its previously announced
$300 million to $500 million range. After a detailed financial review, the
company said that it anticipates restructuring costs for all initiatives to
total in the range of $500 million, with implementation continuing over the
next three years. Avon also said it expects to realize annual savings in
excess of $300 million when the restructuring is completed.
The company said that its largest savings will come from actions to
improve organizational effectiveness by removing layers of management and
broadening spans of control throughout its global organization. Avon's early
actions have been focused in this area. This delayering program is projected
to be completed during 2006 and to ultimately yield approximately $150 million
in annual savings. The company intends to undertake other projects focused on
realigning its global manufacturing base; improving procurement and
distribution processes; and regionalizing, centralizing and outsourcing
certain activities and transactional processes.
Avon said it expects to re-invest a large portion of its restructuring
savings back into its business to drive sustainable revenue growth. Savings
are to be spent on increased advertising, enhanced support and programs for
its Representatives, additional product research and development and market
research. Advertising is forecasted to increase 50% in 2006 alone, and to
more than double from 2005's level by 2008.
Beyond the transition year of 2006, Avon said it will seek to contain
overhead expenses in line with or below the prior-year's level to further
improve profitability and enable ongoing reinvestment in the business.
The company reiterated that it projects revenue to be flat to up slightly
in 2006, and forecasts revenue growth in local currencies that will average
mid-single digits after 2006.
Andrea Jung, chairman and CEO, commented, "We are encouraged by the
progress we are making as we implement the early phases of our turnaround
plan. With the costs and benefits now fully sized, we are focused on the
proper sequencing of initiatives to ensure successful execution. The
organization is fully aligned behind our plan and committed to this important
task, and we are confident that we are taking the necessary steps to restore
Avon to sustainable growth."
Ms. Jung is expected to discuss these plans at the Consumer Analyst Group
of New York conference today in Scottsdale, Ariz. The presentation will be
webcast live beginning at 10:15 A.M. Eastern time, and can be accessed at
http://www.avoninvestor.com for a period of two weeks afterwards.
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 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:
general economic and business conditions in our markets, including social,
economic, political and competitive uncertainties in Latin America, Asia
Pacific, Central and Eastern Europe and the Middle East; our ability to
implement our business, cash management and tax strategies and our multi-year
restructuring initiatives and our ability to achieve anticipated benefits from
such initiatives; the possibility of business disruption in connection with
our multi-year restructuring initiatives; our ability to achieve anticipated
cost savings and our profitability and growth targets, particularly in our
largest markets; our ability to implement appropriate product mix and pricing
strategies; the impact of changes in consumer spending patterns and
preferences, particularly given the global nature of our business; our ability
to replace lost sales attributable to the repositioning of the U.S. Beyond
Beauty business; the impact of substantial currency fluctuations on the
results of our foreign operations and the cost of sourcing foreign products
and the success of our foreign currency hedging and risk management
strategies; our ability to implement our Sales Leadership program globally, to
increase Representative productivity and recruit Representatives; our ability
to implement our enterprise resource planning project; the impact of possible
pension funding obligations and increased pension expense on our cash flow and
results of operations; the impact of stock option expense pursuant to
Statement of Financial Accounting Standards No. 123(R); our ability to
successfully transition our business in China in connection with the
anticipated resumption of direct selling in that market; the effect of legal,
regulatory and tax proceedings, as well as restrictions imposed on us, our
operations or our Representatives by foreign governments; the risk of an
adverse outcome in our material pending litigations; our ability to
successfully identify new business opportunities; our access to financing; and
our ability to attract and retain key personnel and executives. Additional
information identifying such factors is contained in our Annual Report on Form
10-K for the year ended December 31, 2004, filed with the U.S. Securities and
Exchange Commission. We undertake no obligation to update any such forward-
looking statements.
SOURCE Avon Products, Inc.
 back to top
Related links:
http://www.avoninvestor.com
http://www.avoncompany.com
Company News On-Call:
http://www.prnewswire.com/comp/079575.html
CONTACT:
Media - Victor Beaudet, +1-212-282-5344, or
Sharon Samuel, +1-212-282-5322, or Investors - Renee Johansen or
Rob Foresti, +1-212-282-5320, all of Avon Products, Inc.
|
