Revlon ColorStay eye products.

Slowdowns in the U.S. mass-market channel have hit beauty companies broadly — and Revlon Inc. is no exception.

The beauty company on Friday reported its financial results, which included a 3.2 percent dip in North America sales.

Overall for the third quarter, Revlon reported a $32.4 million net loss, with a net sales increase of 10.2 percent year-over-year to $666.5 million. Pro forma net sales, which consider the company’s acquisition of Elizabeth Arden, decreased 10.5 percent.

Earnings before interest, taxes, depreciation or amortization dropped sharply, to $53.6 million from $122.9 million in the prior-year period. On a pro-forma basis, EBITDA dropped 48.9 percent, driven by sales declines in North America.

Revlon said the problems in the U.S. are the result of declines in the mass retail channel in North America. That segment of stores has been hit by a number of factors, including growth in online shopping and specialty beauty stores drawing customers away.

“They are taking steps to enhance the consumer experience and give consumers better access to testers, better access to innovation,” Revlon chief executive officer Fabian Garcia said on the company’s earnings call, talking about North American mass-market retailers. “In a way, playing the playbook of the more premium specialty-beauty retailers.…I don’t think everything is lost in the mass channel.”

“It will take time to restore growth to that portion of the business,” Revlon chief operating officer Chris Peterson said.

Shifts in that channel have also caused inventory destocking, which affected Revlon’s numbers as well.

“Customers have made decisions to reduce inventory to match consumption at brick-and-mortar retail, so if the category is down 3 or 4 percent, a number of customers have chosen to reduce their inventory by 3 or 4 percent,” Peterson said, noting that the move could help make existing inventory more productive and lower the cost of introducing innovation.

“The cosmetics market, the beauty market in the U.S. is growing, it’s just that it’s not growing in the brick-and-mortar mass channel,” Peterson said. “It’s growing overall, and what we’re focused on is changing our model so that we catch up and effectively leapfrog from a digital standpoint and drive growth through that channel.”

In addition to problems in the mass channel, Peterson outlined four macro trends that are affecting the business: Consumers are looking to engage with brands online through influencers, social media, e-tail, product information and ratings; consumers are choosing to buy online; product innovation cycle times are going from between 12 and 24 months to as short as six months, and consumers have different channels where they can buy brands — including specialty-multi and subscription services.

In line with those trends, Revlon is doing three “fast-track innovation tests” for Revlon, Almay and Elizabeth Arden, where products from each brand will be developed within nine months, from concept to purchase, Peterson said. “We are also learning how to launch digital first,” he noted.

Almay, which has faced problems that include shrinking self space in certain channels, is getting ready to unveil a new concept that features actress Rashida Jones as an “Almay Insider” in a campaign called “Reveal the True You.” The display is already up at the new Manhattan Ulta Beauty location, but the campaign will roll out broadly in early 2018, Garcia said.

Revlon is also embarking on digital initiatives. E-commerce sales are small — 3 percent — but growing — 48 percent for the third quarter, globally — part of the business, and the company has hired digital agency SapientRazorfish to help it navigate digital initiatives, including online growth.

Back in January, Revlon reorganized the company to focus on the brands rather than distribution channels. Garcia noted that has allowed Revlon to have a more clear understanding of brand performance.

Revlon’s consumer segment posted a 10.5 percent year-over-year drop in net sales, with $306.7 million for the quarter; Elizabeth Arden posted an 83.5 percent increase from the prior-year period, with $248.1 million in sales, and the professional segment saw a 9.9 percent net sales dip from the prior-year period, to $107 million.

“Even in the face of a quarter like, this I remain very optimistic about the future and our ability to return the company’s financial performance to sustainable profitable growth,” Garcia said.

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