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Published
May 6, 2017
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Revlon stock price plummets as North American sales decline

Published
May 6, 2017

Despite an increase in this quarter’s sales compared to the same quarter last year, Revlon saw its shares take their biggest drop since the 2008 financial crisis. The New York-based cosmetics company’s stock dropped 23 percent to $19.40 per share.
 


The company attributed the overall slump to the North American market as a whole. While Revlon's acquisition of its competitor Elizabeth Arden at the end of 2016 pumped up quarterly net sales some 35 percent over last year to $594.9 million, investors focused on the pro forma basis, which excludes the increase in sales from Elizabeth Arden. Those results show Revlon sales dropping by 5.8 percent. 

"Most of our U.S. retail partners experienced lesser foot traffic, store closures and shopper channel shifting to online and beauty specialty retail," Chief Executive Fabian Garcia said on a quarterly conference call. "Although beauty remains a growth category in the U.S., where and how consumers shop for beauty is evolving," Garcia said.

Declining traffic in U.S. malls seems to be the biggest factor in dwindling sales for a cosmetic powerhouse like Revlon. According to Moody’s ratings spectrum, a little more than 13 percent of American retailers are at the distressed tier, representing the highest percentage since the recent financial crisis.  

In a press statement on first quarter earnings, Revlon said it was disappointed with the U.S. results, but that "our brands continue to achieve strong international net sales growth across all segments" and that its "iconic beauty brands have demonstrated resilience and have maintained market share in the U.S.” The company says it plans to restore its brand growth in the U.S. with various innovations, such as "elevating in-store and online experiences and digital-first engagements." It also plans to focus on fast growing channels and its international expansion, particularly in Asia and Latin America.
 
With the acquisition of Elizabeth Arden, Revlon also says it will change its structure to put more focus on brands rather than on channels. The company has formed four new groups as part of its strategy – Revlon, Elizabeth Arden, Fragrances and Portfolio Brands. The makeup brand estimates the integration program will result in $190 million in cost reductions over a multi-year period.
 
“In spite of the retail challenges we are facing in the U.S., I am confident that we have the strategy, leadership team and capabilities in place to deliver our long-term growth ambitions,” Garcia said.
 
Additional reporting by Reuters. 

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