NEW YORK — Avon has taken the first steps to become a more nimble beauty firm.
In the initial phase of its already-announced multiyear restructuring effort, the company said Wednesday that it would consolidate its top management. At the same time, Avon's chairman and chief executive officer, Andrea Jung, will become more closely involved in the day-to-day oversight of the firm's business units through the creation of an "office of the chairman," which also will include president and chief operating officer Susan Kropf.
Avon declined to discuss the number of job losses that will result from the reorganization, which Jung first revealed at the company's annual meeting in November without providing details. The restructuring is expected to cost $300 million to $500 million before taxes over the next several years, and will have the largest impact in 2006.
"By flattening the organization, strengthening integration and centrally managing the global brand and supply chain functions, we will significantly increase speed and flexibility in decision-making, become closer to our representatives and customers and achieve our goal of delivering world products at world-class cost," Jung said in a statement Wednesday.
The new structure seeks to make the company more agile and ready to respond to encroaching competition from mass market players such as L'Oréal and Procter & Gamble.
Earlier this fall, the $7.7 billion direct seller reduced its full-year 2005 earnings forecast. It now expects full-year earnings to grow in the low- to midsingle digits. Avon also expects full-year revenues to rise by midsingle digits, and operating profits for the year to be flat to down.
The reorganization calls for a new, "delayered" reporting structure for senior management and the addition of two geographic regions, namely Central and Eastern Europe and China. The aim, according to Avon, is to bring the company's senior managers closer to key business areas.
Avon now will manage its business through six regions, called commercial business units: Central and Eastern Europe; China; North America; Latin America; Western Europe; Middle East and Africa, and Asia Pacific.
The company also will streamline its brand marketing and supply chain functions into global business units, with regional staff reporting to leaders of these functions.
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