Reaching far outside the beauty industry, Revlon will today appoint Jack L. Stahl, former president and chief operating officer of Coca-Cola, as its new president and chief executive officer, effective immediately. The expected move was first reported here on Friday. Stahl signed his contract Sunday evening.
Stahl’s appointment comes on the heels of the resignation of Jeffrey Nugent, president and ceo of the struggling beauty firm since December 1999. Revlon announced Nugent’s resignation Friday morning.
Stahl will be Revlon’s fifth ceo since Ronald O. Perelman bought the company in 1986. His appointment will take effect a year into a turnaround plan, constructed by Nugent and his team. The plan’s aim was to, first, stabilize the company, which has been bleeding sales and market share, and, second, restore it to growth. Nugent had left a comfortable job as president of Neutrogena, which was growing under his guidance, to take on the challenge. He replaced George Fellows, who also was at the helm for only about two years, but left abruptly after Revlon’s balance sheet was buried in mounting inventory and escalating costs.
What attracted a beverage executive to cosmetics? “What I like to do is build brands and create success,” said Stahl. What Coke and Revlon have in common, is “they are both world class brands.”
At Revlon, said Stahl, “I have the opportunity to capitalize on the operational improvements made over the past three years and now turn the strategy to growth through great marketing and great partnerships with retailers.”
Stahl, 48, first cousin of “60 Minutes” correspondent Lesley Stahl, added, “I will not make any assumptions” about the cosmetics business. “I will start with respecting the differences and make sure I respect the differences in how the brands are marketed.” He added, “I look forward to learning the dynamics of the industry.”
“Great brands,” are created when companies “have effectively been able to create a promise” and deliver on that promise. That means, explained Stahl, “excitement, great images and innovation — all tied in to what people want.” By taking the same approach at Revlon, asserts Stahl, “We can accelerate growth.” He anticipates a culture in which “everyone at Revlon will help with the marketing.” The key thing, he said, “is to find what people want in a cosmetics brand and whether it be variety or innovation, create a business system to meet that challenge.”
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In essence, the mission agreed upon with Perelman, said Stahl, is to “create success we can all be proud of together. We don’t want to create numbers that don’t hold up.”
Stahl’s first order of business will be to spend time with the Revlon staff. “It all starts from there.” Next will be meeting with retailers. That is a “high priority.”
Stahl said that at Coke, “what we tried to do is increase per capita consumption of soft drinks.” While president of Coca-Cola USA, “we virtually tripled the growth rate.” Today Coke claims about a 45 percent share of the the U.S. soft drinks market, compared with Pepsi, at 31 percent.
When asked what he considered his strongest talent, Stahl said it was in spotting opportunities and pointing them out to the right people, or “helping to see opportunities to grow a business and connecting that to great people who can attach themselves to it and bring it home.”
During his first interview Monday, Stahl repeatedly emphasized that his role at Revlon is to spur growth. He seemed to approach the industry with humility. When asked what skills he needs to strengthen, Stahl quickly replied: “Learning the dynamics of this industry. I’ll be very respectful of it. I bring a growth orientation with me. I’ll work with the leadership team to help promote that growth.”
Stahl arrives as Revlon’s sales continue to slide and competitors gain market share at its expense. While still the market leader, sales of Revlon lip color fell 17.7 percent to $182 million as Cover Girl grew 45.2 percent to $110 million, for the year ended Nov. 4, according to Information Resources Inc. In nail color, meanwhile, Sally Hansen bypassed Revlon as the market leader last fall, buoyed by its new Chrome Nail Makeup and Maximum Strength polish. Revlon’s share of the drugstore cosmetics market settled in at 17.6 percent in the third quarter, down from 20.7 percent in the first quarter of 2000. In food stores it claimed 12.1 percent of sales and in mass stores, 14.3 percent in the third quarter, also down from 2000.
The recruitment of Stahl indicates Perelman’s growing impatience with the slowness of Revlon’s turnaround. In an exclusive interview with WWD at Revlon’s headquarters days before the Stahl announcement, Perelman acknowledged that for the last year and a half he has been more actively involved in day-to-day management, acting as a “co-ceo.” He added that “now I want to get less involved.”
Revlon will be “changing the way it communicates,” according to Perelman. He is eyeing newcomer Rochelle Udell, executive vice president of creative development and design at Revlon since January, as a key player in this. Udell will oversee “all the creative,” including advertising, packaging and display. A former publishing executive, Udell most recently headed up a team creating a WWD Web site, but left the company after the project was disbanded.
In the interview Perelman showed impatience with the marketing and merchandising thrust the company had taken. He sounded off, in particular, on the offbeat advertising for Absolutely Fabulous lipstick, which centered around the interactions of four unknown models, including a gathering in the ladies room. He called the spots “poorly executed.”
Upbeat about the future of his company, Perelman stressed Revlon has “great products” and listed Super Lustrous lipstick, Skinlights, a new lip gloss called Lip Glide and Absolutely Fabulous as examples. Absolutely Fabulous is getting a fresh start with a new ad campaign from a new ad agency, Deutsch. The company also has resumed its use of high-profile spokeswomen after a brief retreat last year. Along with Julianne Moore and long-time spokeswoman Halle Berry, Revlon is restocking its model stable with up and comers like Jamie King and Carolina Ribeiro.
Perelman’s choice of Stahl indicates a new tack after repeatedly giving industry veterans a shot at turning around the struggling Revlon over the last 15 years. Some observers see Stahl’s appointment as a way for Perelman to appease Wall Street, which has been given little to cheer about in the company’s performance. Revlon’s sales have slipped each quarter for three years straight, plummeting from $2.2 billion in 1998 to $1.8 billion in 1999 to $1.5 billion in 2000. Fourth-quarter results for 2001 will be reported on Feb. 25 and are expected to show a further decline. Behind the scenes at Revlon, chief financial officer Douglas Greeff had been playing an increasingly important role, appearing at industry events and participating in interviews. With Stahl, Greeff’s voice is likely to diminish.
Stahl, a 22-year veteran of Coca-Cola, resigned in March 2001, after helping to restructure its organization. With an MBA from Wharton, he started in the finance department and moved through the ranks, including several years as president of Coca-Cola USA. He eventually was named president and chief operating officer in 2000.
But observers questioned whether Stahl was up to his new role. After all, Perelman greeted Nugent’s arrival at Revlon with much the same fanfare and optimism. Even in Monday’s statement Perelman was gracious about the former ceo. “All of us here at Revlon want to express our gratitude to Jeff,” he said in a statement. “He came to Revlon and was given the very important and difficult challenge of lowering costs overall and improving operational efficiency across the enterprise. Through diligence, creativity and hard work, he has accomplished those goals and successfully prepared the way for the company to begin a new phase of growth.”
Perelman’s statement said Nugent led with “determination and enthusiasm” and added that the “last two years were spent changing the trade terms and bringing down the costs.” The problem for Revlon, and eventually for Nugent, was that these cost savings came with a high price and dug into Revlon’s coveted market share, executives added.
It is unclear if Stahl’s appointment came as a surprise to the former Revlon head. Nugent did not return calls for comment.
But just two weeks before his resignation, Nugent had seemed satisfied with the results of his six-point action plan, which included reducing manufacturing capacity, selling off non-core businesses, slashing overhead and placing new trade terms on retailers to tighten inventories. Bloated drugstore inventories were one of the worst of the problems Nugent had inherited. Another was inflated market share from an excess of buy-one-get-one-free offers. In an interview with WWD at Revlon’s Madison Avenue headquarters, Nugent said, “Now the shift is from cost reduction to growth.”
Light on liquid assets, product innovation was dry the first year of Nugent’s tenure. The lack of product innovation increased the pressures on the then-ceo, making it vital that Revlon’s product launches in 2001 be successful. But while the company delivered new products last year, some important launches, like Absolutely Fabulous lipstick, missed the mark. It enjoyed successes with Skinlights and Illuminance eye shadow, but in Revlon’s two key categories — lip and nail — competitors hit the home runs. For example, Nugent had invested high hopes in Absolutely Fabulous, but it was Cover Girl’s Outlast that won at the cash register. Long-wearing lipcolors from Procter & Gamble’s Cover Girl and Max Factor also ate into Revlon’s share.
Nugent’s theory was that Revlon’s share had to drop to rectify Revlon’s past practices of loading the market with promotions that netted share, but torpedoed profits. Like his rockstar brother, Ted, Nugent is a man of strong opinion and was adamant about not “buying share.” He had said recently, “We are going to build back market share, not buy it back.”
He complained that competitors have stolen market share recently through money losing promotions — like those Revlon used to offer. Retailers in all three mass channels have obviously felt the pinch of dried up promotional dollars. “They want us to take free goods for any deals we make. They are desperate to not pay out any money to retailers in the form of cash,” said one major retailer. Perelman, in his interview, claimed that Revlon had in fact substantially increased its spending against the consumer over the last two years in everything from in-store promotions to national advertising.
Nugent had been painstaking in understanding the nuances of the Revlon brands, which also include Almay, Ultima II and Flex shampoo, and would stop both store clerks and shoppers to ask their thoughts on his items. Still, the company’s difficulties continued under his tenure, even if the third quarter came in better than expected. Net losses for the quarter ended Sept. 30 for ongoing operations after adjusting for restructuring costs, totaled $2.2 million, or 4 cents a diluted share, compared with year-ago losses of $13.1 million, or 25 cents. Analysts were expecting much steeper losses of 16 cents a share for continuing operations. Sales for the period slipped 5.1 percent to $327.2 million, while revenues from continuing sales dipped a lesser 2 percent to $326.9 million.
Its sliding revenues and loss of market share are increasingly being reflected in its share price. Shares of Revlon dropped 10 cents, or 2.6 percent, to close at $3.82 on the New York Stock Exchange Friday. While minor, the decline came on top of Thursday’s 48 cent, or 10.9 percent, drop. This compares with a high of more than $47 in February 1998. In an attempt to reverse its share price slide, Revlon executives have been making the point to Wall Street that the company is more than a pretty face. Although Revlon cosmetics comprises 44 percent of sales, the company also competes in hair color, implements and antiperspirants.
Revlon has also endured credit downgrades over the last quarter. In December Moody’s downgraded Revlon’s senior secured debt to Caa3. The action was prompted by a refinancing in which the firm issued $363 million in bonds and entered into a $250 million credit facility. Triple ‘C’ ratings are considered highly speculative and rest in the bottom quarter of Moody’s rating scale.
Standard & Poor’s has Revlon corporate credit rated B-minus with a negative outlook. To improve its rating, “in a nutshell,” said S&P’s analyst Lori Harris, “Revlon needs to reverse the decline in revenue and in market share and it needs to generate positive cash flow to enable the company to reduce debt.”
Revlon’s problems weren’t helped by its constant switches in strategy. In trying to find its voice, Revlon has repeatedly shifted from one advertising approach to another — all in just over a year. It first ousted its in-house ad agency and dropped Cindy Crawford to move into a new partnership with Kirshenbaum Bond and Partners and a campaign with the tagline “It’s Absolutely Fabulous Being a Woman” that relied on less familiar faces. But, as sales showed little uptick, it now has shifted back to marquee names, like Julianne Moore, and tapped a new ad agency, Deutsche, which also handles Almay. It has also reprised a Revlon tagline from the Eighties, “Be unforgettable.” Actress Ellen Barkin, Perelman’s wife, continues to do the voice overs, which she has done on spots for Absolutely Fabulous lipstick and High Dimension hair color.
According to Competitive Media Reporting, from January through September, Revlon spent $36.9 million on TV and print ads for lip, eye, face and nail products, compared to Maybelline, which spent $78.8 million. L’Oreal spent $46.8 million and Cover Girl $43.5 million. On Almay, the company spent $20 million.
Stahl may actually be arriving at a good time. With Nugent having done much of the cleaning-up work, Revlon could be poised for growth if it gets the right product launches. Nugent already had planned to build on some of Revlon’s brighter launches next year, including Skinlights and Almay Kinetin and Milk Plus skin care. High Dimension hair coloring will receive new advertising to better explain its benefits.
Surprisingly, despite sales declines, many retailers have eased up on their complaints about Revlon in recent months. A spokeswoman for Wal-Mart, albeit a favored customer since it’s the Revlon brand’s largest single account, said it had “finished the year strong.”
The promise of a new store fixture called “Her Wall,” which plays up shade selection, and another lipcolor launch called Lip Glide, also have given even smaller retailers something to pin hopes on. There has always been a reverence shown to the venerable glamour brand, and retailers have been willing to suffer its ups and downs longer than it would with another franchise. Yet with Maybelline and Cover Girl already now ahead in overall market share, the question hovers whether Revlon can ever regain its eminence.
“We do anticipate a much better year this year,” said Kathy Steirly, vice president for beauty merchandising at Eckerd Corporation. Steirly said the chain has a new Revlon team leader who is enacting positive changes.
What retailers agreed Revlon has done well with in the last year is halting the damaging practice of loading the trade with too much inventory. “Revlon is coming to us and determining that some prepacks might be too big for our stores,” said one buyer from the Northeast. “When did you ever hear Revlon say that before?”
Kristen Heinz, cosmetics category manager for Kerr Drug in Durham, N.C., has been pleased with the attention her chain has been receiving over the past year, compared to three years ago when her company was all but ignored. Business has been stable, said Heinz, “Ladies still come in for their Super Lustrous and Moon Drops.”
The biggest headache, buyers said, is coming from the new return policy. One retailer said that Revlon is willing to give markdown dollars to reduce returns. “However, most women won’t buy a foundation that is marked down,” she added. Buyers fear the situation could be exacerbated as Revlon phases in new packaging in the next year.
Burt Flickinger III at Reach Marketing thinks Revlon needs to shake things up by appealing to the diverse shopper base. “They may have rid themselves of overhead, but they need to market to Latinos and other groups. And they need breakthrough products,” he said.
Most observers who have followed Stahl’s career applauded his appointment at Revlon. John Sicher, editor and publisher of Beverage Digest, a longtime acquaintance of Stahl’s, describes the new Revlon ceo as “a man known and admired for his talents. He has a great deal of financial savvy and is also extremely well-liked by employees and customers.”
While Sicher said that Stahl is “well-suited for the job,” he added, “though it may be easier selling Sprite for Coca- Cola than lipstick for Revlon.”
Manley Molpus, president and chief executive officer of the Grocery Manufacturers of America, a food industry trade group, said when Stahl chaired GMA’s Industry Affairs Committee, he helped shift its focus from Efficient Consumer Response (ECR), which deals with supply chain and logistics issues, to one on “growth and the bottom line.” He commented, “This does look like a very good fit.”
William Steele, a consumer products analyst with Banc of American Securities, noted that, with Stahl’s “background with Coke — which is one of the preeminent brands in the world — certainly his skill set is building brands. He has tremendous experience. Revlon has tremendous brand-name recognition, but they need to revitalize the brand. It needs to gain some momentum at retail.”
Davenport & Co. analyst Ann Gurkin, who followed Coca-Cola during Stahl’s tenure, said he “was really very well respected by analysts, other beverage executives, the bottlers, internal personnel, customers and retailers.” She added that “he did very thorough research” and, in her view, would excel at Revlon “in terms of retail and customer relationships. A lot of skills would transfer over — customer relations, branding and advertising.”
Another Wall Street analyst who followed Stahl while he was at Coca-Cola noted, “If it’s an organization that needs a shot in the arm and needs to right itself, Jack’s probably not a bad choice. If he needs to come up with a whole new strategy and turn it around, I think that would be much more difficult for him.”
And some beauty gurus are less than sanguine that Stahl will last longer than any other of Revlon’s recent ceos.
Bob Grayson, a longtime industry consultant, said on hearing the news, “That’s crazy. He won’t understand the industry and it has never worked for companies who have gone outside of the industry before. This isn’t what Revlon needs.”
Wendy Liebmann, president of WSL Strategic Retail and a sometime consultant to Revlon, said, “Revlon has kept their head above water, but they have a long way to go. I think one of their challenges is how to continue to improve their profitability and at the same time spend heavily against creating some really significant excitement for the consumer.”
The skepticism is perhaps justified. After all, many retailers and industry executives have seen the play performed before at Revlon under Perelman. Five months into Nugent’s reign at the company, executives “relaunched” it at a party for retailers at the National Association of Chain Drug Stores annual conference in Palm Beach. At the event, projected on to the side of a white tent were the words “The New Revlon.” Pens were handed out to every guest bearing the bold inscription.
Perelman, industry analysts and executives can now only wonder: Is Stahl the one who will deliver on the slogan at last?
– Laura Klepacki and Faye Brookman with contributions by Pete Born and Evan Clark