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Show co Tuesday, May8, 2001 Avon Prepares for New Retail Venture BeComing brand soonto be in Sears, J.C. Penny stores the equation.” Avon projects Valero Buying Ultramar For $4B in C ash, Stock beComing could generate’ $200 million to $300 million in U.S.sales alone by 2005. Plansalso call for dis- THE ASSOCIATED PRESS tribution in the United King- rock Corp.in a $4 billion cash and stock deal that would create the nation’s second largest oil refiner. Once the deal announced Monday is completed, San Antonio-based Valero would have $82 billion in annual Meanwhile, any fears that beComing would siphon off business from direct sales seem to have been alleviated by THE ASSOCIATED PRESS NEW YORK — Ata time of dizzying change in the cosmetics industry, Avon Products Inc., the world’s leading direct seller of beauty products,is rewriting its 115-year-old rules of doing business. | “We want to shake things up,” said Andrea Jung, chief executive officer. “We can’t be staid.It’s scary, risky, but fun.” The $5.7 billion company, which has built its business on direct sales, is preparing to launch its first retail brand. The beCominglineis slated to appear thisfall in 200 J.C. Penney Co. and Sears, Roebuck & Co. stores. Next year, the line — rang- ing from spa creams and candiesto lipstick and cooling foot spray for mothers-to-be — is expected to be in more than 500 stores, Theprices of beComing are up to twice that of the Avon brand, and will be aimed at a younger, more educated con- sumer, The average age range for Avonis 35 to 55. The companyis by no means retiring the Avon Lady. Last year, it spent $100 million in Avon's core business, including advertising and revamping price, Liebmann said. A 1.7- ounce bottle of beComing fragrance, for instance, is priced at $30, compared with $20 for Avon. line. Avon is stepping into new terrain as competition in the $35 billion cosmetic industry is heating up. It’s going up against a mixed bag ofspecialty ing another $40 million this year. This month the company unveiled a line of nutritional and aromatherapy products under Avon, and Jung also team up with two ofthe weakest players in the retail industry, both of which havebeen struggling with their cosmetics businesses. and Sephora to Banana Republic, all of which are expanding or retooling their formats. Meanwhile, department stores are offering free makeovers Analysts also question Avon’slevelof advertising and promotional support, estimated to be about10 to 15 percent of total net shipments of beComing. This year, Avon plans $10 million to $15 million in shipments, which wouldrise to $60 million to $80 million ers are now tapping into feelgood products, like serumsthat help reducestress. next year, said Steve Bock,re- tail division president. Jim Gingrich, an analyst at Sanford Bernstein, said the support spending may not be enough to drive wewill be leveraging J.C. Pen- Liebmann, president of WSL ney’s and Sears, Roebuck’s Strategic Retail, a consulting strength with compelling prod- to total linesorstores.” SPRINGSPECTACULAR SAVINGS —— é NUES!! 399T@ Be ws9915 =S'Sb0 Leather, Moontoot, neaa {6.99% Financing Also Available For Up To 60 Months 0.4.C.** Prem Pactge wih ee (0, Moooat4 49 pal Stk# 9828 ‘ae Be s30510 6.99% Financing Also Available For Up To 60 Months 0.A.C.** /LARRY H. MILLER ALEXUS PYAR DUE ICC Marat eel www.lexus.com uct,” she said. “You just can’t look at the advertising part of Valero said it would trail in the United States. Executives of both Valero and Ultramar, also based in Avon rep Jeannette Walck- San Antonio, said no layoffs were planned but that some employees would be offered early-retirementincentives. Falls, N.Y., has been able to — double her earnings in one year by selling online and run- “We're taking two of the best independentrefining and marketing companies andreally becoming the premier U.S. refining and marketing company,” Valero chairman ning an Avon mall kiosk. “T havefull-time income on part-time hours,” said WalckAs for Avon’s new retail venture,shesaid,“I wasa little nervousatfirst, but it’s a completely differentline.” Avon is also planning on and chief executiveBill Gree- growth overseas. During the than doublein Russia. Revenuesin China gained 40 percentfrom the period a year earlier. INVESTMENT DiS “substantial premium” over Valero would add seven refineries with a combined Friday’s closing price better reflects Ultramar’sreal value. Theofficials pointedlysaid they didn’t envisionlayoffs. “We don’t plan on anylayoffs as a result of this transaction,” Gaulin said. “There will be a role for everybody. 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In midday trading Monday on the New York Stock Exchange, shares of Ultramar jumped 18.9 percent, or $8.06 a share to $50.77, while Valero shares fell $2.42, or 5.3 per= aes to 05. tramar chairman and chiet executive Jean Gaulin said the market had undervalued his company’s stock and said Valero’s offer of a capacity of 850,000 barrels of oil per day. first quarter of 2001, the company reported double-digit sales gains in central andeast- 5.15% $42.71 only Irving-based Exxon Mobil Corp. in refining capacity yk, a 34-year-old from West 12 Month e NCUA percent premium over Ultra- mar’s Friday closing price of 5,000 retail outlets. top-line growth, but Jung disagr “Weare fully confident that cash per share for the remaining shares. That would represent a 29 refineries and. more than company tested kiosks ‘in malls, which sold Avon products, and found that 95 percent ofthe customers were new. The kiosks are now being licensed to sales associates. yk, who works 20 hours a week. and new brands with limited distribution elsewhere. The definition of beauty is also expanding. Avon andoth- firm. “Consumers are notloyal wants to develop a teen beauty warming up to Avon's choice to stores, from Victoria’s Secret “Competitionis fierce,” said Kurt Barnard,a retail consultant. “Avon has a hard road aheadof them.” “The cosmetics market is very fragmented,” said Wendy its e-commerce site.It’s invest- Many analysts are still not common stock and pay $55 revenue, 23,000 employees, 13 Jung pointed out that the TinaFineberg/The Associated Press Andrea Jung; CEO of Avon Products Inc. announced recently that the companywill soon launchits first retail brand, beComing. proval from both companies’ shareholders and from federal regulators. Valero would exchange 1.228 shares of its common stock for about half of the outstanding shares of Ultramar Diamond Shamrock Ultramar Diamond Sham- dom and Mexico, Jung said. BY ANNE D’INNOCENZIO deal, which still needs ap- SAN ANTONIO — Valero Energy Corp.is buying rival | I | I | I | 1 > The Salt Lake Tribune BUSINESS |