By  on May 9, 2007

NEW YORK — After six months of heavy lifting, Revlon has begun to reap the rewards of its restructuring plan.

The beauty firm's cost-cutting and modest sales increase helped narrow Revlon's loss during the first quarter ended March 31 to $35.2 million, or 7 cents a diluted share, from a loss of $58.2 million, or 15 cents a share, in the prior-year period. Revlon's sales for the quarter gained 1 percent to $328.6 million from $325.5 million, fueled by international growth and offset somewhat by lower product shipments.

Revlon president and chief executive officer David Kennedy told analysts Tuesday, "The improvement in our costs and expenses was a direct result of the restructuring actions we announced last year," which included trimming head count and consolidating office space. Kennedy noted that, to manage costs, the firm has expanded the responsibilities of existing employees.

The quarterly results included restructuring expenses of $4.3 million, compared with $9 million in the year-ago period. The firm expects its restructuring costs for the fiscal year to total $7 million, the bulk of which is slated for the first half. During the quarter, Revlon seemed to make a bid toward a younger consumer, signing starlet Jessica Alba and "Entourage" actress Beau Garret as spokesmodels. The two women, who costar in the upcoming film "Fantastic Four: The Rise of the Silver Surfer," replace former Revlon spokeswomen Julianne Moore, Susan Sarandon and Kate Bosworth. Revlon's Limited Edition collection, complete with eyelash jewels and shimmer lip topping, also suits a younger demographic than Revlon's core consumer, noted William Chappell, analyst with SunTrust Robinson Humphrey Capital Market.

To capitalize on beauty's strongest trend at the moment, the firm's Almay brand plans to enter the mineral makeup fray with the introduction of Pure Blends Mineral Make-Up later this year. Chappell commented that "Revlon is about a year and a half late to the party with the mineral makeup line," but nodded to the success of Limited Edition.

In the most recent quarter, Revlon's U.S. sales declined 2.5 percent to $193.3 million from $198.3 million in the year-earlier period, hampered in part by lower shipments of Revlon color cosmetics. International sales gained 6.4 percent to $135.3 million, driven by growth in Australia, South Africa and the U.K.Revlon, which had been quiet on the new product front, said upcoming launches include 3D Extreme Mascara fronted by newly signed spokesmodel Alba; Renewist Lipcolor; Age Defying Makeup Primer, which retailers said was plucked from its now-defunct Vital Radiance line, and a blush and a bronzer version of Almay Smart Shade, a colorless foundation that imparts color after it's smoothed onto skin. "We can take that technology and utilize it to build a product line that creates sustainable share and profit overtime," said Kennedy.

Revlon's share of the U.S. mass market declined 1.4 percent to 13.2 percent, while Almay's share inched up to 6.5 percent from 6.4 percent. Kennedy attributed Revlon's decline to fewer product launches in the quarter. He noted that Revlon's share had been declining for a period of four to five years, although the decline accelerated last year as the company focused its "intellectual capital on the launch of Vital Radiance."

When asked by an analyst if Revlon will step up ad support to ward off competition from beauty firms, including Avon Products, Kennedy said the company consistently has advertised at competitive levels. He added, "In my view, it's about profitable share growth….We are not going out and chasing some share at this point, and spending money to do that. We don't believe that's prudent."

He told analysts, "We are intensely focused on new product developments and have instituted processes to fully engage R&D and marketing in new product development, including the formation of a senior leadership team, which I will lead, to accelerate new product development and, importantly, strategically manage our brand product portfolios for profitable growth overtime."

load comments
blog comments powered by Disqus