NEW YORK, Nov. 15 /PRNewswire-FirstCall/ -- Avon Products, Inc.
(NYSE: AVP) today announced a multi-year restructuring effort as part of a
major drive to fuel revenue growth and strengthen overall performance.
Avon said its restructuring initiatives will include:
-- enhancement of organizational effectiveness, including efforts to
flatten the organization and bring senior management closer to
consumers through a substantial organization downsizing;
-- implementation of a global manufacturing strategy through facilities
realignment;
-- additional supply chain efficiencies in the areas of procurement and
distribution; and
-- streamlining of transactional and other services through outsourcing
and moves to low-cost countries.
Avon expects to incur costs to implement these initiatives over the next
several years, with a significant portion of the total costs to be incurred
during 2006. Costs are expected to total $300-$500 million before taxes, and
the company projects that initial pre-tax costs of $20-$40 million, or
$.04-$.07 per share after taxes, could be incurred in the fourth quarter 2005.
Avon said it will announce further details as initiatives are finalized.
The company expects that benefits from restructuring will help to fund a
significant increase in consumer investment as well as improve the
competitiveness of its direct selling opportunity. Advertising, market
intelligence, consumer research and product innovation will be funded at
higher levels, with advertising spend projected to more than double by 2008.
These actions are expected to improve revenue growth prospects beginning
in 2007. The company projects that revenue will be flat to up slightly in
2006 in local currencies, and forecasts revenue growth in local currencies
that will average mid-single digits after 2006.
Additionally, Avon said it expects modest improvement in its operating
margin beginning in 2007, after the benefits of restructuring and higher
consumer investment.
Andrea Jung, Avon's chairman and chief executive officer, commented, "With
this plan, we're taking very aggressive action to address the issues we faced
in 2005, and to become a far more streamlined global competitor that is closer
to its consumers. By taking a comprehensive approach to our enterprise
expense base and global value chain, we are identifying more efficient and
effective ways of operating. We will, in turn, reinvest much of the projected
savings to fuel topline growth and improve our competitive position.
"Avon's strengths remain enviable, and we continue to believe that we have
the right overall strategies and a powerful business model. The actions we
announced today are intended to accelerate our transformation, and return our
business to a sustainable growth trajectory in both revenue and earnings per
share," Ms. Jung concluded.
Avon management will review its business strategies and discuss its long-
term outlook at a company-sponsored investor meeting here today. The meeting
will be webcast live beginning at 9:00 A.M. Eastern Time, Tuesday, November
15, and will later be archived on Avon's investor website,
http://www.avoninvestor.com .
Avon is the world's leading direct seller of beauty and related products,
with $7.7 billion in annual revenues. Avon markets to women around the world
through 4.9 million independent sales Representatives. Avon product lines
include such recognizable brand names as Avon Color, Anew, Skin-So-Soft, Avon
Solutions, Advance Techniques Hair Care, Avon Naturals, Mark, and Avon
Wellness. Avon also markets an extensive line of fashion jewelry and apparel.
More information about Avon and its products can be found on the company's web
site 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 press release and the related conference and webcast
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, our multi-year restructuring
initiatives and our ability to achieve anticipated benefits from such
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; 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.
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Related links:
http://www.avoncompany.com
http://www.avoninvestor.com
Company News On-Call:
http://www.prnewswire.com/comp/079575.html
CONTACT:
MEDIA: Victor Beaudet, +1-212-282-5344,
Sharon Samuel, +1-212-282-5322, INVESTORS: Renee Johansen or Rob
Foresti, +1-212-282-5320, all for Avon Products, Inc.
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