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Sears drops cosmetics
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July 10, 2001: 8:23 a.m. ET
No. 2 retailer will take $53M charge to exit business, including Avon payment
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NEW YORK (CNNfn) - Sears Roebuck & Co. is pulling out of cosmetics sales and will take a $53 million after-tax charge to cover its exit from the business.
The charge includes a payment to Avon Products Inc. (AVP: Research, Estimates) to compensate the cosmetics company for its decision not to launch its beComing line of cosmetics in 125 stores this fall. The size of the payment was not disclosed by the two companies.
Avon said that the launch of the products in 75 department stores of J.C. Penney Co. (JCP: Research, Estimates) is proceeding as planned and that it is looking for new retail partners to replace Sears (S: Research, Estimates), the nation's second-largest retailer behind Wal-Mart Stores Inc. (WMT: Research, Estimates)
Avon reiterated its previous earnings guidance for both the second quarter and full year, despite the setback to its strategy of expanding to retail channels from its core direct marketing business.
"We are disappointed that Sears has made a change in its approach at this late stage and won't be part of the beComing venture," Avon CEO Andrea Jung said. "We have always viewed retail as a long-term strategy for Avon. We are as committed as ever to our retail initiative."
Analysts surveyed by earnings tracker First Call expect Avon to earn 57 cents a share in the second quarter, up from 52 cents a year earlier, and to post earnings per share of $2.09 for the year, up from $1.88 in 2000.
Sears said it also will drop its proprietary Circle of Beauty brand sold in 450 stores.
"As work on improving the performance of full-line stores progresses, it has become clear that a broad cosmetics business no longer fits with our financial and strategic objectives for Sears full-line stores," CEO Alan Lacy said..
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Sears will continue to offer selected fragrances, bath and body products and candles, with an emphasis on gift and seasonal items. 
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