Chairman and chief executive Andrea Jung told analysts and investors that Avon understands the issues in its business today. She added that Avon would deliberately give less detailed financial forecasts as it works on improvements.
“The company has up to 14 management layers in its organization, depending on the division, while other companies operate effectively with as few as seven or eight,” Ms. Jung said. She indicated Avon would have a “substantial downsizing” but did not give specific figures on jobs to be cut.
Avon has been grappling with increased competition, particularly in the anti-aging skin care market, where competitors have launched several new products at prices below Avon’s Anew line. The company said that the restructuring will enable it to increase spending on advertising, market research and product innovation. Ad spending is expected to more than double by 2008.
The company has reported declines in sales in several markets, including China, where boutique owners reduced the size of their orders in connection with the anticipated resumption of direct selling in that country.