Thoughts on Avon Closing Its Salon and Spa

On Friday Avon announced that it is closing its salon and spa in Manhattan on June 16, after eight years of operation. Avon’s only spa is prominently located in Trump Tower on Fifth Avenue. When I heard the news, I naturally wanted to get more details, not only because we participated in a press event there on Monday morning but also because I wanted to understand: Why?

So I studied their financials (since Avon is a public company, the numbers are available), dug a bit deeper into their business model, and spoke with some of their management. The facts painted a different picture from the initial one I envisioned after hearing the somewhat shocking news. Here are some tidbits:

Avon was founded in 1897

Avon is the world’s leading direct seller of beauty and beauty-related products

The company did a record $8 billion in sales last year

Avon has five million sales reps worldwide

A $100 million state-of-the-art R & D center in Suffux, NY was just constructed

The company recently announced a “delayering” strategy to remove some management levels

Salma Hayek is the Avon spokesperson

Avon Wellness is working with Curves

The recently released Anew Clinical Eye Lift has done more than lift eyes – it also seems to have helped lift Avon’s stock price

Bottom line? The Friday earnings announcement, in which the closing of the Avon Salon and Spa was mentioned so briefly that it was almost a footnote, resulted in a 4% increase in Avon’s stock price!

My guess is that while they made the decision to close due to corporate restructuring, they will likely be happy to give up what must be sky-high rents at Trump Tower and the high labor costs which are common in the spa industry (often over 50% of revenue). Smart business move – but probably a little hard on the ego.

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