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Wella to Slash 1,200 Jobs

BERLIN — Wella announced it will cut 1,200 jobs in light of a cooperative supply chain contract signed with Procter & Gamble Wednesday.

The contract will consolidate both companies’ activities in production and distribution, and aims to improve efficiency and build synergies between the two firms, as well as address overcapacity, Wella said in an official release. Several production centers will be closed worldwide, in favor of joint production sites in strategic areas.

In the U.S., P&G’s Clairol headquarters, based in Stamford, Conn., will remain open as Global Retail Hair Color Headquarters and manufacturing facility for most of Clairol-Wella North America. The site, which staffs 750 employees in research and development, manufacturing, business operations, marketing and external relations, will consolidate two facilities into one building. P&G will sell the other building to the city of Stamford; it is slated to become a public school.

Prior to the decision of keeping the Stamford site, it had been rumored for nearly six months that the facility would be shut down.

Rob Matteucci, president of Clairol, stated in a release that the company is “delighted that these decisions represent a win for [Stamford] along with an ongoing Clairol-P&G presence in Stamford.”

However, the Stamford plant will launch a cost and productivity optimization program which will lead to a reduction of approximately 285 positions over the next three years, a number a company spokesperson said would be achieved first through attrition, then retirement, which also includes natural head count reduction.

The consolidation of Wella Hair Care production volume in North America into P&G sites will also result in the closure of Wella plants in Richmond, Va., and Mexico City.

Together, Wella and P&G currently employ about 13,000 people in production and distribution in the areas of beauty care and prestige and professional care.

P&G said that, generally speaking, severance packages will be offered, including cash payments, continued benefits for a period of time, outplacement assistance, and a retraining allowance.

As a result of the supply chain consolidation, Wella also announced that Emil Kiessling GmbH, a Wella subsidiary based in Georgensmünd, Germany, that specializes in private label production, will be sold.

This story first appeared in the July 29, 2004 issue of WWD.  Subscribe Today.

— Melissa Drier and Andrea Nagel, New York

Avon Profits Up 36 Percent

NEW YORK — Avon posted its strongest second-quarter growth rate since 1990, as earnings jumped 36 percent and sales rose 13 percent.

The results — spurred by growth in its international operations — were so strong that the company raised its 2004 earnings expectations to $1.72 per share, up from $1.70. But sales in the U.S., Avon’s largest market, increased just 3 percent, causing the direct seller’s stock price to dip Wednesday.

Still, earnings for the quarter shot up 36 percent to 49 cents per share from 36 cents in the year-ago period. Sales rose 13 percent to $1.84 billion from $1.63 billion in 2003, driven by a 17 percent increase in beauty product sales.

Net income, meanwhile, increased 35 percent to $232.3 million, or 49 cents per share, from $171.5 million, or 36 cents per share, during the second quarter of 2003. This included a 1 cent gain from a tax audit settlement.

“The company has never been in better shape,” Avon’s chairman and chief executive officer Andrea Jung said in a conference call to investors.

Executives credited the gains to better-than-anticipated international growth. In Russia, Avon’s fastest growing market, sales grew more than 80 percent, while Asia-Pacific sales increased 20 percent, driven by a 60 percent surge in China.

U.S. sales, though, were not quite as strong. They grew 3 percent overall, with beauty product sales up 6 percent and beauty plus product sales up 4 percent.

Executives pointed out that the number of active representatives rose 11 percent company-wide and 4 percent in the U.S.

“It’s a great time. It’s hard not to feel an unprecedented optimism,” Jung said. “This is what it looks like when all of Avon’s strategies work together.” — Carrie Melago

Unilever Net Rises 33%

LONDON — Net profit at Unilever, the Anglo-Dutch food-to-fragrances company, rose 33 percent to 823 million euros, or $991.9 million, from 618 million euros, or $703 million, in the second quarter due chiefly to an increase in income from fixed investments, and lower interest charges and taxes.

All figures are converted from the euro at the average exchange rate for the corresponding periods.

Sales at the company, the icon brands of which include Dove, Lux and Knorr, dipped 3 percent to 10.84 billion euros, or $13.06 billion, from 11.16 billion euros, or $12.70 billion, due overall to flat sales of leading brands, poor ice cream and instant tea sales in Europe and weak consumer confidence during the second quarter in key markets such as Europe and North America.

Operating profit rose six percent to 1.33 billion euros, or $1.6 billion, from 1.26 billion euros, or $1.43 billion, in the quarter ending June 30, the company said in a statement Wednesday.

Unilever reported a gain of 20 million euros, or $24.1 million, in fixed investments from the sale of shares in Elizabeth Arden, which it formerly owned.

The company does not break out sales for the prestige fragrance division. The personal care division, which includes prestige fragrances, saw sales rise 1 percent to 2.79 billion euros, or $3.36 billion. — Samantha Conti