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:
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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