Avon Products Inc.'s (AVP) work to build its brand, innovations and number of active sales representatives in recent years has worked, Chief Executive Andrea Jung said Thursday, and it's a strategy the company plans to continue.

Jung made the comments at an investor presentation that followed the beauty-product company's release of its third-quarter earnings. In the quarter, Avon's earnings excluding items beat analysts' estimates as the company made improvements in unit sales and found supply-chain savings.

But Avon shares declined as much as 8.7% to $30.12 Thursday morning as investors focused on the company's unit volume declines in North America and China. Later in the day shares were down just 1.7%, as the broader market rose and as investors appeared to like what they heard during the company's more than four-hour presentation.

Jung said Avon is laying the roadmap for sustainable market-share expansion and earnings growth in 2010 and beyond. Jung, who said she will be staying with the company for the foreseeable future, noted that in recent years Avon has made a large investment in advertising and the company has also elevated its pricing power.

In response to the economic downturn, Jung said Avon has been focusing on sales of its products priced at under $5.

Moving forward, Avon said that Latin America is its top beauty-market opportunity. Among the reasons for this strategy: People in Latin America spend a relatively high proportion of their discretionary income on beauty products, Avon said.

Meanwhile, one of the main concerns for the company is its business in North America, where the company expects macroeconomic challenges to continue for the next 18 months. Avon's North America unit volume declined 5% in the third quarter.

The challenge in the region is the company's falling unit volumes of nonbeauty products, which include jewelry and home decorations. Geralyn Breig, president of Avon's North America division, said average Avon representatives get 36% of their earnings from this category.

To address the problems with nonbeauty volumes, Breig said the company will be de-emphasizing these products via a strategy that includes investing in the company's high-margin skin-care category.

Meanwhile, a concern for investors was the company's performance in China, where units sold fell 19% year over year--in sharp contrast to the 32% year-over-year gain in the prior quarter.

Another issue analysts are focusing on is the company's $22 million decline in advertising spending year over year. Sanford Bernstein & Co. analyst Ali Dibadj said that while Avon believes it has found a balanced level of ad spending, he thinks that amount needs to increase, particularly as global competition for the company is growing.

Jefferies analyst Douglas Lane said Avon's underlying momentum indicators remain strong, as unit volumes and sales on a local-currency basis both accelerated sequentially. Most importantly for Lane, Avon increased the number of its active representatives by 10% year over year.

Looking to the fourth quarter, Avon's revenue could benefit from easing pressure tied to foreign-currency translation, company Chief Financial Officer Charles "Chuck" Cramb said.

"Our top line is still impacted by foreign exchange, but that pressure is starting to lift," Cramb said.

While foreign exchange created a drag of 11 percentage points on Avon's third-quarter revenue, resulting in a 4% revenue decline, it could provide a mid-single-digit percentage point lift to sales between the third and fourth quarters, he said.

Cramb said lower spending so far this year means Avon's capital spending is likely to range from $300 million to $325 million, compared with an earlier forecast of $325 million to $335 million. But Avon remains on track to deliver $1.08 billion in cost savings in the 2012-2013 timeframe, he said.

-By Jennifer Hoyt Cummings and Mary Ellen Lloyd, Dow Jones Newswires; 212-416-2474; jennifer.cummings@dowjones.com