Cosmetics manufacturer Avon Products Inc. is planning to move its headquarters to Britain and cut about 2,500 jobs in the process, the New York-based company said Monday. The news boosted stock prices nearly 4.3 percent to close at $4.38 a share.
The company said the move is intended to bring its headquarters closer to commercial operations, after it sold its North American business March 1 to private equity firm Cerberus Capital Management as part of a $605 million deal. The move will also cut costs, thanks in part to job cuts, the company said. Executives previously said moving headquarters overseas will not be an inversion, an often controversial move in which American companies are bought by foreign firms, thus reducing their taxes.
"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," Avon CEO Sheri McCoy said in a statement. The company said it expects to save about $50 million in 2016 as part of the move and the job cuts, and as much as $70 million a year starting in 2017.
Avon, a 130-year-old company that has built is reputation on selling lipstick and creams door to door, has struggled for more than four years with declining revenue and for more than the past year with falling share prices as customers increasingly have gravitated toward online purchasing.
The company announced the plans to break off its North American division in December, and in January Avon executives announced a transformation plan that they promised would "strengthen Avon's position as a leader in beauty" and "introduce a new generation of women to a brand we know they will love."
The job cuts will affect about 7 percent of the company's workforce, and the move will generate one-time expenses of roughly $60 million. Door-to-door selling is more popular overseas than in the U.S., and Avon said that with the move it hopes to reduce bureaucratic infrastructure and concentrate sales in more lucrative geographies.