The latest announcement is that 650 positions will be eliminated globally as part of the $400 million Cost Savings initiative by 2016, which the company announced in December 2012.
External communications manager, Lindsay Blaker Fox tells CosmeticsDesign.com USA that these actions, like those previously announced, are aimed at boosting efficiencies and concentrating resources on high priority markets and activities.
“The company expects today's restructuring actions to result in annualized savings of approximately $40 million to $45 million before taxes as part of the $400 million Cost Savings initiative,” she says.
“The company continues to look very closely at our cost structure for incremental opportunities to drive savings.”
Charges
The latest actions primarily consisted of global headcount reductions, including those related to the company’s service model transformation (SMT) project, and some additional headcount reductions in North America.
Total charges to be recorded as a result of these actions are expected to be approximately $35 million to $45 million before taxes, with approximately $35 million expected to be recorded in the fourth quarter of 2013.
As well as the job cuts, Avon also announced its decision to halt further rollout of SMT, a multi-year global initiative, which enabled changes to the way Representatives interact with the company, including an updated order management system.
Halt!
Earlier this year, SMT was piloted in Canada, causing significant business disruption in that market, and did not show a clear return on investment.
The decision to stop further rollouts was made in light of the potential risk of further disruption says Avon, as it looks to stabilize and grow the business and improve operating capability, which includes updating IT infrastructure in a way that delivers clear return on investment.
With this decision, the direct seller expects to record a pre-tax non-cash impairment charge of approximately $100 million to $125 million in the fourth quarter of 2013, reflecting the write-down of capitalized software.