Avon Products Inc has decided to reduce its headcount by about 2,500. The beauty product maker is also planning to move its headquarters from New York to the UK, and invest in technology and innovation to enhance sales volume.
Established 130 years ago, New York-based Avon Products Inc is struggling to make a turnaround for the past one year. Avon has decided to shift headquarters from New York to the UK in a phased manner, while continuing its New York incorporation.
The decision to shift its headquarters to the UK is not for tax advantage, according to an Avon spokesperson. Since Avon has bulk of operations in the UK, the beauty product manufacturer has decided to move its corporate functions closer to its focus area, as reported by The Wall Street Journal (WSJ).
Sheri McCoy, Chief Executive at Avon Products Inc who's in her fourth year of service, is optimistic on the turnaround that will put the company back on track. Avon's stock notably fell 40 percent in 12 months. The company suffered from drop in quarterly revenues for the past four years.
With an objective of reducing costs and enhance operational efficiency, Avon has set a target of $350 million costs cut including $70 million in 2016. The 2,500 jobs cut will reduce total workforce by seven percent. It's hoping to generate $30 million pre-tax savings in 2016. The layoff will take pretax charges during the first quarter to $60 million, according to BBC.
James Scully, Chief Financial Officer of Avon Products Inc, said "The company is examining strategies to reduce its tax bill but it wouldn't be able to conduct a so-called inversion, in which a US company is bought by a foreign firm reducing its taxes. There are other tax strategies that we can deploy which can reduce cash taxes."
Reuters further adds that as part of the ongoing three-year turnaround plan, Avon is focusing mainly on cost reduction, shifting of headquarter over time and investment in technology. It's decided to use social media as well to enhance sales volume. Higher than forecast drop in sales for fourth quarter is further indicating company's inability to revive the demand for cosmetics in major markets.
Two weeks ago, Avon completed sale of its North American operations to Cerberus Capital Management LP, a private equity (PE) firm, receiving cash injection from the complex deal. The slow pace of business in the US propelled Avon to offload its stake to Cerberu.
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