After decreasing its projection for the year, the multinational professional services company Accenture has decided to lay off 19,000 of its employees. This decision comes at a time when the corporation is facing more competition as well as a hard environment for business. Continue reading to gain further insight into the implications of this statement.
Accenture Stock (NYSE:ACN)
On Thursday, Accenture (NYSE:ACN) posted earnings and sales that exceeded the consensus estimates. But, the company dropped its guidance for the full year and announced that it planned to cut approximately 19,000 employees.
In a filing with the appropriate regulatory bodies, the company, which provides IT consulting and other services, said that it would be laying off around 2.5% of its personnel. It was stated that more than half of the departures would come from nonbillable corporate functions, and the company is still hiring new employees to support its strategic expansion.
CEO Julie Sweet issued the following statement regarding the company’s plans: “We are…taking steps to cut our costs in the fiscal year 2024 and beyond while continuing to invest in our business and our people to seize the substantial growth prospects ahead.”
The second fiscal quarter for Accenture (NYSE:ACN) came to a close in February, and the company announced adjusted earnings per share of $2.69 for the period. The revenue reached $15.81 billion, which is a 9% increase from the same period in the previous year when expressed in local currency.
According to the results of a survey conducted by FactSet of financial analysts, the consensus forecast for Accenture’s quarterly earnings was $2.49 per share on revenue of $15.59 billion.
The company reported that its quarterly new bookings of $22.1 billion established a record and were up 17% in local currency compared to the prior year.
During the premarket hours, trading of Accenture stock increased by 3.5%. The price of the stock has dropped by 23% over the course of the previous year, whilst the S&P 500 index has dropped by 12% during the same time period.
Accenture stated that it now anticipates full-year sales growth of 8% to 10% in local currency, which is a decrease from its earlier expectation of 8% to 11% growth. In comparison to an earlier projection that ranged from $11.20 to $11.52 per share, it now anticipates full-year earnings to fall somewhere between $10.84 and $11.06 per share.
Expectations about the rate of revenue growth had been prepared for the possibility of a reduction. Analysts at J.P. Morgan noted in a research note published prior to the results report that there was a possibility that Accenture’s clients may delay the start of new projects. The stock of Accenture took a beating in December after the company issued a cautionary statement about a slowdown in expenditure by clients.
Customers who depend on Accenture’s services could be concerned about how the job cuts would affect the quality of the services that they continue to receive from the company. Notwithstanding this, Accenture has emphasized that it is still dedicated to providing its customers with services of the highest possible quality. The company is certain that the reduction in staff will not impact its capacity to provide satisfactory service to its customers.
Accenture’s projections for full-year free cash flow increased to a range between $8.0 billion and $8.5 billion, up from a previous range of $7.7 billion to $8.2 billion. This was despite the fact that the company’s outlook for sales and profitability was reduced. It maintains the expectation that it would return at least $7.1 billion in cash to shareholders by means of dividends and share repurchases.
What Were the Factors That Led to Accenture’s Decision To Reduce Its Workforce?
The decision to reduce the number of employees at Accenture was not made on a whim, but rather as a direct response to the challenges that the company is facing in the present economic climate. The COVID-19 epidemic has had a significant influence on the economy, and the sector of the economy that deals with professional services has not been exempt from its repercussions. The industry is growing more saturated with competitors, and consumers are becoming pickier about the kinds of services they need to satisfy their needs. Companies such as Accenture need to consistently innovate and adapt to new circumstances if they want to remain competitive in their industries.
Accenture has not only had to contend with the epidemic but also with intense competition from other companies. This has resulted in competitive pricing, which, in turn, has had an impact on the profitability of the organization. As a direct consequence of this, Accenture has been compelled to reassess its business practices and come to some unpopular conclusions.
What Repercussions Will This Have for Accenture?
The choice to reduce the number of available positions is not an easy one, and it is one that Accenture did not make lightly. The corporation, on the other hand, is of the opinion that in order to maintain its position in the market, it must both simplify its business processes and cut the costs associated with those operations. A wide variety of positions and departments, such as consulting, marketing, and technology, will be eliminated as a result of the employment reduction.
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