Avon Products Inc. is cutting around 2,500 jobs worldwide and shifting its corporate headquarters to the United Kingdom as part of a three-year turnaround plan, the cosmetics company announced Monday.
The move follows the split in its North American operations March 1, when Cerberus Capital acquired majority control of the company after four years of dipping sales. This left the New York-based company with a focus on operating overseas, where door-to-door cosmetics sales are more viable.
Avon became privately held this month, maintaining a 20 percent stake. Cerberus invested $435 million in it and $170 million in the newly created North American division.
While incurring one-time expenses of around $60 million in the first quarter from costs like severance, the job cuts will hopefully generate up to $70 million in savings by 2017.
“The actions we are taking today will bring our corporate and commercial businesses closer together, which will drive efficiencies, improve operational effectiveness and deliver significant cost savings,” said Avon CEO Sheri McCoy in their statement.
The relocation to the UK is designed to reduce corporate infrastructure, explained Avon, which already maintains “significant” operations in the said country.
Avon, however, will maintain its current Suffern and Rye, New York facilities and continue trading on the NY Stock Exchange under its current symbol.
The company, which has 28,300 employees, had earlier outlined its plans to slash $350 million in costs in the upcoming three years, investing in technology such as social media channels to revive its sales. Its fourth-quarter sales decline in 2015, which was bigger than expected, signaled a failure to revive demand in its key target markets.
Back in December, Barington Capital and other investors proposed in a letter of Avon restructuring, expressing criticism and lost confidence in the brand’s leadership. In response to the Monday statement, Barington welcomed the decision yet believes Avon should add new independent directors in its roster.
Founded by David McConnell 130 years ago, Avon took off and flourished during the era of door-to-door sales. That same channel, though, has waned in the United States and continues to do so today.
Following the announcement, Avon shares climbed up to 3.9 percent in extended trading.
