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Avon Expects $700 Million Savings
Posted: February 15, 2007Avon Products, Inc. announced that it expects annualized benefits from Product Line Simplification (PLS) and its Strategic Sourcing Initiative (SSI) to exceed $400 million when fully realized. Avon management will review these initiatives and its business strategies at a company-sponsored investor meeting that will be webcast live and will be archived on Avon's investor website, http://www.avoninvestor.com/.
Coupled with savings from its previously announced restructuring program, Avon said total savings and benefits from the combined initiatives are expected to exceed $700 million. "We are pleased that these incremental benefits will provide us with additional fuel with which to continue to drive our turnaround," said Andrea Jung, Avon's chairman and chief executive officer. "We are seeing strong paybacks from our investments to drive growth, and in 2007 we will again invest in the business at accelerated levels, to build a strong foundation for sustainable growth."
The company said it expects to realize initial benefits from Strategic Sourcing beginning in the second half of 2007, with total annualized benefits from this single initiative exceeding $200 million by the end of 2009. The company expects no large costs associated with implementing SSI. Avon said it anticipates similar benefits from PLS, with benefits building progressively over the next three years. To date, the company has incurred costs of $81 million, primarily incremental inventory obsolescence, on this effort.
The company said that it will use the savings and benefits from its restructuring, PLS and SSI initiatives to fund increased investments in both its brand and channel. Avon reiterated that revenue growth should average mid-single digits over the long term.
"We are making the right investments for this business at this important juncture to set the stage for enhanced profitability in the future," said Ms. Jung. "We are managing the business for the long-term and investing to strengthen the foundation and restore sustainable growth."