As part of its ongoing restructuring program, beauty products giant Avon Products (NYSE: AVP) announced plans to reduce its workforce by 2,400 jobs. The company's restructuring plan was first announced in 2005, and the company is now looking at completing the restructuring in 2011.Previously, the restructuring was supposed to run the company $500 million, but now the estimates are pointing to a total cost closer to $530 million. Once completed, the company plans to save itself approximately $430 million annually. This is substantially higher than the original $300 million annual savings the company had initially anticipated.
While the company has been moving through its restructuring over the past two years, the stock has been trading pretty strong. Since the end of 2005, the stock has moved from $27.34 to its current price of $39.00, picking up 42.6% for its shareholders.
Of the total $530 million in charges that the company will ultimately incur from the restructuring, $460 million of this amount will have been taken by the end of 2007's fourth quarter, and the rest is expected to be completed by the end of 2009. In the fourth quarter 2007 alone, the company will incur charges of $120 million.
Analysts are liking what they are seeing. Over at Citigroup (NYSE: C), analyst Wendy Nicholson maintains her buy rating on the stock. According to Nicholson, the company is executing its restructuring perfectly, and she went on to say that she feels that in 2008 and 2009 the company is likely to have the best earnings growth in Citigroup's large cap group.
Traders seem to agree, and today the stock has moved higher, picking up $0.45 to $39.00, up 1.1%.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer
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Reader Comments (Page 1 of 1)
3-24-2009 @ 12:46PM
Me said...
Avon is stumbling. First, new reps are miserable. Avon allows unlimited numbers of reps in any town. Market saturation means new reps can't get customers without stealing them from other reps. Second, new reps are even more miserable. Waiting, stressing, waiting for their orders to appear. Avon uses a bogus company called Superior Delivery Network that doesn't use authentic tracking numbers from reputable carriers. Instead, carriers dump Avon boxes anywhere and anywhere, if they deliver them at all. The new Avon rep has zero, that is, zero access to true and accurate status on their shipmnts. (I am again waiting for an order myself. That's three business days wasted waiting around the house so the carrier can't say a neighbor heisted my package.) Third, the experienced reps are mean to new reps. They don't want t lose any more customer, so they do evil, even illegal things to the new reps. Fourth, new reps are pressured to buy inventory from the pyramid leadership scheme. Fifth, victims of this scheme are told the only way, yes, the only way to earn money with Avon is to go into recruiting. Which means adding more representatives to an already over-loaded broken system. If I hadn't invested so much in start-up expenses, I'd be gone already. Avon doesn't care if late orders and shabby products harm your reputation. "No US Customer Service for you!" is their motto! "No tracking numbers for you!" "No customers for you!" High turnover is going to get worse as Avon focuses on penetrating other countries at the expense of the US market.