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Avon restructuring could mean 3,000 fewer employees

By Simon Pitman , 23-Feb-2009
Last updated on 23-Feb-2009 at 18:29 GMT

Avon says its newly expanded restructuring plan should see the company’s workforce shrink by up to 3,000, while the number of sales representatives is set to rise.

The company says that over the next four years it is aiming to reduce the number of people in its workforce by between 2,500 to 3,000, worldwide - a figure that is expected to be achieved mainly through natural turnover and removing current vacancies.

Speaking at the Consumer Analyst Group of New York conference, CEO Andrea Jung stated that, contrary to the job losses in its permanent workforce, the company will be increasing the number of sales representatives in many of its leading markets.

Avon has already launched a major recruitment plan in the US and Jung singled out the Chinese market as a means of embracing the rising number of unemployed individuals looking for a means of income.

Tackling the strong US dollar

Speaking at the same conference as Jung, Avon’s vice president Charles Cramb cited the main reason for the expansion of the restructuring plan was the fact that a strong dollar had impacted fourth quarter results significantly.

Around 70 percent of the company’s sales are derived internationally, and many of its operations in both Latin America and the Asia Pacific region have reported strong sales volume increases, despite the economic downturn.

However, as the effect of the volume increase has not been felt due to the strength of the US dollar – a situation that is expected to impact results well into the third quarter of 2009 - the company says that it must try and cut costs if profit is to meet market expectations.

Supply chain and international operations

As well as trimming back the workforce, the company will be targeting the supply chain by outsourcing more of its processing, which will see many of its international operations consolidated.

The extension to the existing restructuring program, which was first announced in 2005, is predicted to cost $300m - $400m and should bring annual savings of around $200m.

This is expected to take total savings from the restructuring plan - already estimated at $900m – over the $1bn mark.

Although Avon’s most recent fourth quarter results showed that sales had dropped 9 percent, aggressive restructuring helped to boost profits by 80 percent.

The company reported that sales fell to $2.8bn, compared to $3bn in the corresponding quarter ending 31 December, 2007, while net income increased to $232.4m, up from $128.9m in the same period last year.

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