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Revlon Moves to Profit in Q1, Keeps Focus on Quality

Sales in the period are up 44.2% on organic growth and the Colomer Group acquisition.

Lorenzo Delpani

Revlon Inc. aims to do a lot more with less.

The beauty firm began implementing a “fewer, bigger, better” launch strategy in the first quarter and expects to continue the effort as it focuses on reducing the quantity of its offering in favor of quality.

“It will take up to a year and a half to two years to see the full deployment of [our strategy],” Lorenzo Delpani, Revlon’s president and chief executive officer, told analysts during the firm’s first-quarter earnings call on Wednesday. “We are going to be evolutionary about this, not radical,” he added.

The idea, Delpani emphasized, is not to lose shelf space at retail, but to improve the performance and longevity of the products in the assortment. “Some initiatives stay on shelf for less than a year,” he noted. “Clearly, this is not efficient.”

The change in strategy comes as the company is working to reverse share losses across the Revlon and Almay brands. Delpani acknowledged that Revlon and Almay sales were flat in the quarter, but said they performed better than the mass-market cosmetics category, which was down during the three-month period. “We are working hard to make sure we turn these [brands] around,” said Delpani. He added that in a soft market, “it becomes absolutely critical for us to grow market share in order to continue the growth of the company.”

Revlon’s recent acquisition of The Colomer Group help boosted the company’s performance in its first quarter.

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For the three months ended March 31, the company swung from red to black, reporting net income of $5.5 million, or 11 cents a diluted share, compared with a net loss of $6.9 million, or 13 cents a share, in the year-earlier quarter. Eliminating the effects of a series of nonrecurring items, including acquisition and integration costs for Colomer, acquired in August, and its exit from China, as well as interest, taxes, depreciation and amortization, adjusted EBITDA rose 49.6 percent to $87.8 million from $58.7 million a year ago.

Total net sales for the company gained 44.2 percent to $469.8 million, compared with $325.9 million. On a pro forma basis, including Colomer’s sales as if it had been part of Revlon in the 2013 period, sales were up 4.4 percent to $469.8 million. Revlon acquired Colomer Group for $665 million from CVC Capital Partners in October.

By segment, consumer sales decreased 0.1 percent to $339.5 million, but gained 2.8 percent at constant currency. The company said the consumer segment now includes retail brands from the Colomer acquisition, which represented $15.5 million of net sales in the first quarter of 2014. The professional segment saw sales surge 18.5 percent to $130.3 million, or up 17.4 percent at constant currency, driven by the performance of CND Shellac and American Crew products.

By region, Revlon’s U.S. sales gained 7.8 percent to $250.2 million, compared with $232 million of pro forma sales. International sales ticked up 0.7 percent to $219.6 million, compared with $218 million of pro forma sales. Excluding the impact of foreign currency exchange, net sales increased 4.8 percent.

In the first substantial move following Delpani’s appointment in October, Revlon said in December that it would close its business in China. It had been decelerating since the second half of 2012 as the Chinese economy slowed.