Revlon reduces fourth-quarter loss, reveals "material weakness" in financial reporting
Cosmetics maker Revlon Inc reported on Monday a net sales drop for the fourth quarter 2018, but narrowed profit losses, adding that it expects to disclose "material weakness" in its internal control over financial reporting as of year-end 2018.
In a press release on Monday afternoon, Revlon said the weakness was in relation to "the lack of design and maintenance of effective controls in connection with the previously-disclosed implementation of its enterprise resource planning system in the U.S." and will disclose the information by March 29. It also confirmed it does not foresee any changes to its previously reported financial results.
In the fourth quarter ending December 31, Revlon said net sales dropped by 5.7% to $741.6 million, hurt by soft demand for its Revlon cosmetics brand, down 13%, and the cessation of key fragrance brand licenses, with its perfume category down 9%.
Net loss was $70.3 million in the fourth quarter of 2018, representing an 8.6% improvement over the prior-year period. The lower net loss was driven by higher operating income, which increased 65.1% to $32.2 million, but was partially offset by higher interest expense. Expenses related to fixing an ERP disruption at Revlon’s Oxford North Carolina manufacturing facility ($54 million) added to the New York company’s woes in the quarter.
Revlon's adjusted EBITDA totalled $124.6 million in the fourth quarter, an improvement 12.8%.
"I am particularly encouraged by strong growth in some of the key areas that we have intensely focused on such as e-commerce, Elizabeth Arden skincare, China and Travel Retail," said Debra Perelman, President and CEO of Revlon.
By category, Elizabeth Arden witnessed a surging 18% growth for the quarter, outpacing the company's Portfolio category, made up of men's haircare brand American Crew, colour cosmetics brand Almay and nail polish brand Pure Ice.
"Our digital strategy continues to pay off as we once again achieved double-digit e-commerce growth, due in part to strong performance from major consumer events including Singles Day in China and Black Friday in North America," added Perelman.
North America sales fell close to 10% during the quarter, with international sales down just 0.6%.
Revlon shares were down over 10 percent in extended trading.
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