NEW YORK, N.Y. - Avon Products said it will cut about 1,500 jobs and exit two Asian markets — South Korea and Vietnam — as the struggling beauty products seller takes some initial steps toward its cost-cutting goal.
The job cuts amount to almost 4 per cent of its workforce and marked one of the first major moves by CEO Sheri McCoy, who was brought on in April to replace longtime CEO Andrea Jung.
"The decisions outlined today are necessary to stabilize the company and begin the process of returning Avon to sustainable growth," McCoy said in a statement.
The New York-based direct beauty products seller said late Tuesday that it plans to focus on high priority markets as part of a push to save $400 million by 2015. The initial steps are expected to be largely completed by the end of next year.
Avon Products Inc., which makes Skin So Soft lotion and Mark makeup, has struggled this year to improve its performance after suffering through declining sales, a bribery investigation and other issues. In addition to hiring a new CEO, the company has tried to cut costs and focus on improving sales through international markets.
Pre-tax costs related to the moves are expected to total between $80 million and $90 million. Avon will take a charge of between $50 million and $60 million in the fourth quarter tied to the cost cutting. It said initial steps will account for about 20 per cent of its savings goal.
At Dec. 31, the company employed about 40,600 people including about 5,400 in the U.S. and 35,200 in other countries.
Last month, Avon reported an 81 per cent drop in third-quarter net income, hurt by a stronger dollar and a hefty impairment charge. Its adjusted loss also fell short of Wall Street expectations.
At that time, the company said it planned to cut costs to save $400 million in three years. It also slashed its quarterly dividend to 6 cents from 23 cents.
Meanwhile, the company still faces long-running bribery investigations. The problems began in 2008, when it started to investigate possible bribery in China related to travel, entertainment and other expenses, and soon widened the probe to other countries, with the Securities and Exchange Commission and Justice Department getting involved.
In September, the SEC decided it wouldn't recommend any action against the company over whether Avon contacted analysts inappropriately during a separate bribery investigation. But Avon still faces wider probes about possible bribery in China and other countries.
Founded in 1886, Avon became a fixture in households across the United States as its legions of "Avon ladies" went door to door selling makeup to family, friends and acquaintances.
Today, the company markets to women in more than 100 countries via 6 million independent sellers.
Its shares finished at $14.47 in trading Tuesday. Its shares are up from a 52-week low of $13.70 in mid-November. They traded as high as $23.58 in mid-April.