Revlon Inc. to Leave China

The company's exit results in 1,100 lost jobs.

After struggling to grow its business in China in recent years, Revlon Inc. said Tuesday it will exit the country and trim 1,100 jobs as a result.

This story first appeared in the January 2, 2014 issue of WWD.  Subscribe Today.

The decision marks the first major change in strategy under the company’s newly installed chief executive officer Lorenzo Delpani, who joined Revlon through its October acquisition of The Colomer Group.

As early as last spring, Revlon warned analysts that its business in China was strained, and since then the company has worked to reduce inventory levels there as sales have slowed.

In April, Chris Elshaw, Revlon’s executive vice president and chief operating officer, told Wall Street analysts during the company’s first-quarter earnings call that in the second half of 2012, the company’s sales in China began to decelerate as the economy slowed. At that time, he said Revlon began “proactively reducing inventory with our distributors.”

The actions continued throughout the year. In July, Elshaw told analysts, “Our consumption is soft in China. There are a lot of changes in the marketplace. It’s a very mixed picture….We’re really focusing on who are our core customers there, how can we partner with them to drive productivity in the store — because in China, it’s really a question of productivity.”

On Tuesday, the beauty firm said in a regulatory filing with the Securities and Exchange Commission, or Form 8-K, that the restructuring of operations will result in job losses primarily in China, including 940 beauty advisers retained indirectly through a third-party agency.

The company said it expects to incur about $22 million of pretax restructuring and related charges, such as severance costs and sales markdowns and inventory write-offs. It expects to record a charge of $20.9 million in December 2013, and the balance during 2014.

The restructuring actions are expected to generate annualized cost reductions of $11 million, with $8 million to benefit 2014 results.

In 2012, Revlon did not break out its sales in China, but the company’s net sales in Asia Pacific gained 2.4 percent in 2012 to $238.9 million, compared with $233.4 million in 2011. Excluding the favorable impact of foreign currency fluctuations, net sales increased 1.9 percent in 2012, driven by higher sales in Japan and certain distributor territories and offset by a decrease in net sales in China.