Avon Calling for Layoffs

Avon (AVP Quote) stock brushed up after the cosmetics purveyor announced it will wipe out about 2,400 net employees.

The layoffs are planned for the finishing touches of Avon's ongoing restructuring plan, which was set into motion roughly two years ago and should be completed by 2011-2012. Worldwide, the company said, some 4,000 of its current workers will get the boot from its last head count of 40,300 (recorded as of year-end 2006).

Avon also lifted its projections regarding both plan costs and ultimate savings. The New York-based company now expects to take a charge of roughly $530 million -- up some $30 million from the most recent prior estimate -- of which around $120 million will be incurred during the fourth quarter.

But once all the changes are rolled out, the company expects to save some $430 million a year, vs. the previous conjecture of $300 million. The latter sum should be broached sometime next year.

Among the new plans are moves to outsource call centers and transaction processing.

Having already put through a number of changes in its U.S. operations, Avon turned its attention to international restructuring efforts. For example, in its foreign-based direct-selling operations, Avon will fire staff, consolidate sales zones and cut administrative costs largely in Europe and "most significantly in Germany."

Furthermore, some of Avon's Western Europe distribution business will consolidate in Alcala de Henares, Spain, as the distribution branch in Neufahrn, Germany, gets phased out. And a Neufahrn-based factory head count will get slashed as part of a "reconfiguration."

Also in the works, among other changes in Avon's Latin American operations are plans to phase out its current Brazilian distribution site following intended construction of a new "state-of-the-art" distribution center, which is slated to open in 2010.

Finally, in a separate "product line simplification" initiative, Avon will take a fourth-quarter hit of around $110 million as it writes off inventory from what it has deemed "non-optimal products." That should yield annual savings of more than $200 million by the end of 2009.

Avon shares were recently up 37 cents, or 1%, to $38.92.