Avon cited a strategy shift by Sears, which is de-emphasizing cosmetics, and said it would receive a settlement from the retailer for backing out of the deal. Avon will go ahead with plans to launch beComing in 75 JCPenney stores this fall, and said it is exploring deals with other retail partners in the U.S. and internationally.
In a conference call with analysts, Avon President-CEO Andrea Jung said Avon would not scale back marketing support because of Sears' pullout and would use some of the settlement from Sears to help pay for marketing.
Avon had planned to back the launch with TV and print ads from WPP Group's J. Walter Thompson USA. Avon had budgeted 10% to 15% of sales for marketing support, including about $2 million in year-one advertising, according to a report from Alliance Capital Corp.'s Sanford C. Bernstein unit.
Ms. Jung said the company's second-quarter and full-year financial results remain on track despite the Sears pullout.
In a separate statement, Sears said it would take an $80 million charge to cover the cancellation of the beComing launch, including a $30 million payment to Avon.