Avon Products has announced it will pull out of the South Korea and Vietnam markets and cut 1500 jobs worldwide as it continues to look for ways to stabilize the business at a turbulent time.
The US-based company outlined the plan as it looks to take its initial steps toward the company's previously communicated annual cost-savings target of $400 million by the end of 2015.
This will begin with a targeted global headcount reduction of approximately 1,500 positions and related actions.
The company also announced that it will exit the South Korea and Vietnam markets, after sales in Asia-Pacific in the third quarter took a big hit; and although these two regions were not the main contributor to this, action has been taken.
Sales in the Asia Pacific region fell by 8 percent to $215.7m, a figure that was actually impacted by a slower performance in the huge China market, where the company continues to see its market share decline.
The company reported that revenues in the China market were down 31 percent, both in reported and constant dollar rates, reflecting a significant re-think on the company's business model in the country also.
South Korea and Vietnam will take the hit as Avon aims to concentrate resources on high priority markets and activities and boosting efficiencies; which is expected to be largely completed before the end of 2013.
Time to stabilize
Cost to implement these actions is expected to be in the range of $80-90 million before taxes, of which approximately $50-60 million is expected to be recorded in the fourth quarter of 2012.
The company anticipates that these initial steps will account for approximately 20 percent of the total targeted savings.
"In order to turn around the business, we are focused on driving top-line growth and aggressively managing our cost base," said Sheri McCoy, CEO, Avon Products.
"The decisions outlined today are necessary to stabilize the company and begin the process of returning Avon to sustainable growth."
The company expects to communicate additional steps toward the cost-savings goal as it progresses.