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Shares of Avon Products, Inc. (AVP Free Report) rose 1.7% after the company announced its long-term financial targets for 2021, backed by a new growth strategy. On its Investor Day, the company updated about the “Open Up Avon” strategy, which is aimed at bringing Avon back on the growth trajectory. This latest strategy mainly focuses on reviving its direct selling business, renovating the brand, enhancing e-commerce and other capabilities to aid a performance-driven transformation.

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 also include reinforcing the company’s balance sheet, where its cash-generating abilities must exceed the investment plans. Further, the company does not intend to raise its debt position by simultaneously reducing the debt level.

Avon estimates achieving revenue growth of low-single digits along with low double-digit margins by 2021. To attain these revenue and margin improvements, the company is likely to capitalize on the strategic breakouts and boost performance.

The company’s new “Open Up Avon” strategy is expected to focus on enhancing the cosmetics maker’s competitiveness, digitizing the Avon brand and offer trendy, new products to redefine the brand’s strong identity. Also, the plan remains committed toward improving e-commerce, data and digital capabilities, and simplifying eco-system to reduce effort and increase access.

Background

We note that Avon has long been witnessing soft Representatives growth, which is hurting the company’s top line. Apparently, it has missed sales estimates in six out of the trailing eight quarters, including the second quarter of 2018. Also, its bottom line lagged estimates in nine of the preceding 12 quarters.

Avon has been aggressively trying to boost Representatives growth, which is a key factor behind the success of its direct-selling business. The company’s rebooting its direct-selling business efforts include differentiating communication and training for the Representative depending on her intent and expectations and providing her with exclusive tools to aid her become a trusted Beauty Advisor. Also, management plans to introduce latest sales talent in its key markets.   

Recently, there were rumors regarding Avon’s potential takeover by Natura & Co — the leading Brazilian manufacturer and direct-seller of beauty and personal care products. However, Natura denies such rumors of buyout talks with Avon.

Earlier this month, Avon highlighted the key milestones in the transformation of its service supply chain, including digital advancements, leadership appointments and operational updates. The company has also made significant improvements in servicing its Representatives across the globe by improving delivery and service, and improving retention levels. The updated technologies permit higher adaptability to demand volatility in forecasting Representative and customer demand, and synchronizing its ability to fulfill their demands by right-sizing inventory and boost delivery capabilities. Avon’s technologies focus on a significant reduction in delays, higher process efficiency, optimization of resource allocation and continuous Representative engagement as well.

Notably, the latest Machine Learning Model has been rolled out in three of the company’s top 10 markets, following impressive pilots in the U.K., Russia and Mexico. Avon remains on track for further rollouts in its top 15 markets by early next year, starting with Brazil in November.

As a result, shares of this London-based company have surged 52.5% in the past three months, outperforming the industry’s growth of mere 0.2%.

Additionally, the company believes that the latest “Open Up Avon” strategy will revive its financial results and help in attaining the above-discussed long-term targets.

Avon, which shares space with The Estee Lauder Companies Inc. (EL Free Report) , currently carries a Zacks Rank #3 (Hold).

Some Better-Ranked Cosmetics Stocks

Nu Skin Enterprises, Inc. (NUS Free Report) has an expected long-term earnings growth rate of 9.7% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LVMH Moet Hennessy Louis Vuitton S.E. (LVMUY Free Report) , also a Zacks Rank #1 stock, has a long-term earnings growth rate of 9%.

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