Avon to cut 2,500 jobs, move corporate headquarters to the UK
15 Mar 2016
Avon Products Inc yesterday said that it would eliminate about 2,500 jobs worldwide and move its corporate headquarters to the UK, as part of the struggling US beauty products maker's three-year turnaround plan.
Avon, which split off its North American operations earlier this month, said that the move will generate one-time expenses of about $60 million in the first quarter from severance and other costs.
The New York-based company expects to realise pre-tax savings of approximately $30 million in 2016 associated with an approximate 1,700 headcount reduction, and expects to achieve annualised pre-tax savings of approximately $65 million - $70 million beginning in 2017.
Avon will maintain its current facilities in Suffern, and Rye in New York and will also continue to be incorporated in New York and traded on the New York Stock Exchange.
In April last, Avon said that it would explore options including potentially selling itself entirely or its struggling North American business. (See: Avon explores sale of North America business)
The announcement comes two weeks after the 125-year-old company completed the spin-off of its troubled North American business, now called New Avon LLC, and sold it to private equity firm, Cerberus Capital Management.
Under the terms of that deal, Cerberus invested $435 million in Avon and $170 million in New Avon LLC. Avon will maintain a minority stake of 20 per cent in Avon LLC.
"Today, we are taking another important step forward in the execution of Avon's transformation plan. With the recent completion of the sale of the North American business, our commercial operations are now fully outside of the United States, allowing us to dramatically rethink our operating model," said Sheri McCoy, CEO.
"The actions we are taking today will bring our corporate and commercial businesses closer together, which will drive efficiencies, improve operational effectiveness and deliver significant cost savings," she added.
Avon believes that shifting its headquarters to the UK will not be considered as a tax inversion move since the company will still be traded on the New York Stock Exchange.
Early this year, Avon laid out plans to cut $350 million in costs over the next three years, invest in technology and tap social media to revive sales.
From a peak market capitalization of $21.8 billion in June 2014, the company's market value has now fallen to just $1.90 billion.
