Revlon reduces losses in third quarter, announces optimization plan

By

Robin Driver

Published
Nov 12, 2018

NYC-based beauty company Revlon, Inc. reported a significant narrowing of Q3 net losses on Friday, thanks to cost-cutting measures which compensated for faltering sales and are soon to be expanded through a freshly announced optimization plan.
 

The company reported total net sales of $655.4 million for the third quarter ended September 30, 2018, down from $666.5 million in the prior-year period.
 
Revlon’s operating income, however, came to $2.3 million up from an operating loss of $5.4 million in Q3 2017, thanks largely to significant cuts made by the company in its selling, general and administrative expenses. This progress ultimately allowed Revlon to reduce its net loss to $11.1 million in the quarter, compared to the loss of $32.4 million reported in the same period in the previous year.

The performance of the group’s different segments was a mixed bag: its Revlon segment, for example, which is made up of the company’s eponymous flagship brands, saw sales of $249.5 million, a decrease of 2% from Q3 2017. This was largely due to lower sales of color cosmetics, particularly internationally, where sales fell 8.2% because of service-level disruptions.
 
The segment fared better in North America, however, with a sales increase of 5.4%, and its profits actually ended up rising an impressive 64.3% in the quarter thanks to significantly lower brand support expenses.
 
The company’s fragrances segment also managed to post a 22.3% profit increase due to effective cost reduction initiatives, despite sales dropping 8.7% to $145.4 million.
 
The Elizabeth Arden segment, on the other hand, posted net sales of $122.1 million, a strong 16.5% increase, driven principally by higher sales of skin care products. In contrast to the Revlon brands, this segment performed particularly well on the international market where its sales rose by 20.6% to $81.8 million, pushed by dynamic growth in Asia and the travel retail channel. Segment profit totaled $6.6 million, compared to $1.6 million in the prior-year period.
 
Sales in the company’s portfolio segment, which includes brands such as Almay, CND and American Crew, slipped 6.4% to $138.4 million, with international revenues down a disappointing 24.2%. The brand grouping’s profits fell from $7.7 million to $2.1 million, making it the only one of Revlon, Inc.’s segments to post a decline in profits in the quarter.
 
“We are very pleased with our third quarter 2018 results and believe that they are reflective of the strength of our business strategy and efforts to stabilize our business operations,” said Revlon President and CEO Debra Perelman in a release. “We are seeing strong growth in our strategic focus areas as we continue to work to build momentum across our businesses.”
 
Along with its Q3 results, Revlon also announced its 2018 Optimization Plan, which is expected to result in between $125 million and $150 million in annualized cost reductions by the end of 2019.
 
The plan is focused on increasing operational efficiency by shifting resources into higher-priority growth areas, a strategy which Perelman acknowledged will imply job cuts. Revlon highlighted three specific objectives that the plan will aim to achieve, namely optimizing the company’s global supply chain, improving in-market execution and streamlining operations in order to reduce overheads.
 
The company expects to complete its optimization plan by December 31, 2019, and predicts that it will incur $30 million to $40 million in pre-tax charges as a result of restructuring due to employee-related expenses, such as severance, as well as related third-party charges.