Trimming the Red: Revlon Cuts Loss to $10.4M

Revlon Inc.'s pragmatism is paying off, as the beauty firm continued to hack away at its net loss during the quarter.

For the third quarter ended Sept. 30, Revlon's restructuring efforts and cost controls installed under chief executive officer David Kennedy helped narrow the firm's net loss to $10.4 million, or 2 cents a diluted share, from a loss of $100.5 million, or 24 cents a share, in the year-earlier period. Sales gained 11 percent to $339.7 million from $305.9 million in the year-ago period.

"Our performance in the third quarter was driven by a combination of increased net sales, continued benefits from the restructuring actions we took in 2006 and early 2007 and the ongoing control of our costs," Kennedy told analysts Tuesday.

Kennedy noted that in the prior-year period, the now-defunct Vital Radiance line, executive severance and restructuring expenses had reduced net sales by about $15 million.

For the nine-month stretch, Revlon narrowed its net loss to $56.9 million, or 11 cents a diluted share, from a loss of $245.8 million, or 59 cents a share, on sales that gained 6.8 percent to $1.02 billion from $952.5 million in the year-ago period.

Following a quiet year on the new product front, Revlon promised a full pipeline of launches for 2008 backed by increased advertising spending. The lineup includes ColorStay Minerals in the first half of next year, which will include long-wearing foundation and baked blush, bronzer and eye shadow. The effort, which comes after many of its competitors have entered the mineral fray, follows the launch of Almay Pure Blends mineral makeup in July. Kennedy, who took over the helm more than a year ago, said Almay Pure Blends is performing about up to expectations and has Almay the option to create a complete mineral makeup line, although the company does not have any firm plans to do so at this point.

Other Revlon products slated for the first half of next year include Custom Creations Foundation — a two-chamber foundation with an adjustable dial to deliver five different shades — and a new Limited Edition Collection that includes Make-a-Sheen Lustrous eye shadow, Floral Affair sheer blush, Creme de la Chrome lip color, Soft on the Eyes eye shadow and Mix and Mingle lip palette.Upcoming Almay products include the brand's first long-wearing face makeup, called TLC (Truly Lasting Color) foundation and the relaunch of the Almay Intense I-Color collection, which was a bright spot in 2005. The firm promised an equally robust lineup for the second half of 2008, but was mum on product details.

Kennedy said the company's display space at retail will remain largely unchanged next year. "We would expect to have the same — broadly speaking — amount of shelf space," he said, acknowledging there was some trimming and adding of space across its retail partners.

In the most recent quarter, Revlon's U.S. sales gained 19.7 percent to $190.9 million from $159.5 million in the year-ago period. Excluding the impact of Vital Radiance, sales were driven by higher shipments of hair color products and partially offset by lower shipments of Revlon and Almay cosmetics. International sales gained 1.6 percent to $148.8 million from $146.4 million in the year-ago period, helped somewhat by growth in the Asia-Pacific region, and offset by lower sales in Europe, which includes Canada, where the firm executed a planned reduction in onetime-only promotional products.

The Revlon brand's share of the U.S. color cosmetics business in the mass market fell to 13.1 percent from 14.5 percent in the year-earlier period, according to ACNielsen, and Almay's share dipped to 5.8 percent from 6.2 percent, despite last year's overhaul of the brand. — Molly Prior

Beiersdorf Earnings Leap

BERLIN — Third-quarter earnings before interest and taxes at Beiersdorf AG's consumer division surged 57 percent to 129 million euros, or $177.3 million at average exchange, on sales that rose 5.4 percent to 1.1 billion euros, or $1.52 billion.

Excluding special factors such as expenses for realignment of the firm's consumer supply chain, operating results increased by 11.6 percent to 135 million euros, or $185.5 million.

In the first nine months of the year, sales of the consumer division, which includes body and face care under the Nivea, Labello, Florena, Juvena, La Prairie and Eucerin brands, as well as Curad and Curitas bandages, rose 8.3 percent, or 9.6 percent on a currency adjusted basis, with EBIT up 29 percent, or 13.7 percent excluding special factors.Group sales for the nine-month period rose 8.1 percent to 4.2 billion euros, or $5.6 billion.

Based on sustained growth in the first nine months, Beiersdorf has upped its 2007 consumer division sales guidance.

The Hamburg-based group is now expecting sales growth of slightly more than 8 percent on a currency adjusted basis, compared with its earlier projection of 7 to 8 percent.

Beiersdorf is forecasting "especially strong growth rates in China, Russia, Brazil and India" for its consumer division. The EBIT margin, excluding special factors, is expected to reach 12.5 percent, outpacing an EBIT margin of 12.1 percent in 2006.

Full-year sales growth for the group, which also includes the Tesa adhesives business, is also expected to be about 8 percent, with an EBIT margin of 12 percent versus 11.7 percent last year.

Beiersdorf said EBIT would continue to be impacted by about 70 million euros, or $101.9 million at current exchange, in expenses relating to realignment of its consumer supply chain. German tax reforms adopted in July, however, will have "a positive effect on profit after tax amounting to about 20 million euros [or $29.1 million]."

— Melissa Drier

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