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Avon Products Inc. Message Board

  • ob1kinob ob1kinob Nov 3, 2012 9:00 AM Flag

    The future

    Given the multi year declines in OP profits and Op margins across all markets, it should be obvious that the OP VPs should be fired immediately. They congratulate themselves on improving service apparently without realizing that the order and unit volume demand declines are the total cause for the improvements and not their leadership. In fact given the demand decline service should far greater than it is. In NA in order to triple the Op margins from 1% to 12% and cut $400MM, draconian cuts will be required. Huge layoffs are coming. Consider that closing a facility is worth just $20 MM to $40 MM depending on size. So you need the equivalent of 10 of those. There are 4 distribution centers today each only working one shift. Do the math. It is obvious what will happen there. At least two are gone. Globally in LA, EU, CE and Asia there are dozens more. Again, do the math. One way J&J thought they saved big money was to outsource a great deal of production. It ruined their quality but it saved $$ short term. Watch for that on a global scale. The China strategy has been a complete failure even with bribery greasing the business there. With a drop of 50% in the past 5 years having a factory and a new standalone R&D center can not be justified. The sales model changes have all failed thus far. SMT will provide great improvements to representatives. But it will be to those who are willing to now pay for things that have typically been free (delivery, sortation, no order restrictions). Since there is 100% representative turnover annually, most representatives are new every year anyway. So, new representatives will never know the difference. Can this business be turned around? Yes. But it will be very painful and very slow if it happens at all. And the Avon most know will be gone.

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