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Avon (AVP) Launches Distillery Brand, Growth Plans Bode Well

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Avon Products, Inc. recently launched Distillery, an innovative skincare and make-up brand with pure and potent formulas that deliver fruitful results. The brand, with a theme of ‘clean beauty without compromise’, has latest and trendy products in the beauty space. Notably, the launch of this game-changing brand is the outcome of the company’s intensive research over the years.

The collection provides customers with high-quality products, excluding unnecessary fillers that go well with their preferences, at convenient prices. Distillery brings nine super-concentrated products, out of which seven are waterless. This comprises five skincare and four make-up products. Of late, Avon has introduced skincare products, which will be followed by the launch of the make-up collection in early 2020.

Apart from customers’ ecstasy, Avon's Representatives will be excited to offer such an innovative collection that is likely to boost their experience and productivity. As a result, it will drive the company’s top and bottom lines.

Coming to strategic endeavors, Avon remains well on track with the ‘Open Up’ strategy that focuses on reviving its direct selling business, renovating the brand, enhancing e-commerce and other capabilities to aid a performance-driven transformation. As part of the plan, the company expects to improve operating efficiency, slash inventory levels and reduce portfolio complexity by certain restructuring efforts including 25% decrease in Stock Keeping Units (SKUs), 15% reduction in inventory levels and 10% job cuts.

These jobs cuts are estimated to fetch Avon annualized pre-tax savings of nearly $97 million by 2019 end. All these efforts are likely to help the company simplify operations and generate higher cost savings. Backed by the strategy, Avon accomplished cost savings of roughly $40 million in 2018.

Backed by the 'Open Up' strategy, Avon remains committed to attain its long-term financial targets. By 2021, the company intends to generate total cost-savings of $400 million by expanding manufacturing and distribution, outsourcing efficiencies, zero-based redesigning of back-office functions, reducing certain facilities and managing revenue, interest and tax. In addition, management expects to invest roughly $300 million toward commercial, digital & IT infrastructure projects.

Investments in the digital & IT infrastructure initiatives include reinforcing the company’s balance sheet, where its cash-generating abilities must exceed the investment plans. Through this strategy, Avon expects to achieve low-single digits revenue growth and low-double digits margin expansion by 2021.

Price Performance & Zacks Rank

In a year’s time, shares of this beauty leader have surged a whopping 98.8%, significantly outperforming the industry’s 18.8% rally. Currently, Avon carries a Zacks Rank #3 (Hold).

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