After two years of heavy lifting and light product introductions, Revlon Inc. has cranked up the pipeline for the coming year with a spate of launches aimed at sharpening its competitiveness. The shift comes as the company swung to a third-quarter profit, versus a loss in the same period last year, because of the sale of its Bozzano men’s grooming line marketed in Brazil.
This story first appeared in the November 6, 2008 issue of WWD. Subscribe Today.
For the third quarter ended Sept. 30, sales growth from recent product introductions — as well as the $45.2 million gain from the July sale of Bozzano — resulted in a net profit of $29.2 million, or 57 cents a diluted share, compared with a loss of $10.4 million, or 20 cents a share, a year ago. Without the sale, Revlon would have had a net loss of $16 million for the quarter. Sales gained 1.1 percent to $334.4 million from $330.8 million.
“Today we are very focused on our strategy, and we think the successful implementation of that strategy puts us in a good position to be competitive,” Revlon president and chief executive officer David Kennedy told WWD after the company’s earnings call Wednesday.
Citing the new product lineup, Kennedy said he expects the items to build on the success of this year’s launches. “If you look back to where we were with Almay and Revlon in 2006 and 2007, clearly 2008 is a very good and successful year in terms of new products,” said Kennedy.
Revlon shares fell 26.3 percent Wednesday to close at $9.61 on the New York Stock Exchange.
U.S. sales for the company dipped 0.8 percent to $189.4 million from $190.9 million in the quarter, supported by higher shipments of Revlon color cosmetics from 2008 launches, but offset by higher returns and allowances for Almay, as the company makes room on the shelf for upcoming introductions.
International sales gained 3.6 percent to $145 million from $139.9 million, helped by higher shipments of Revlon cosmetics.
Year-to-date, earnings were $46.6 million, or 91 cents a share, compared with losses of $56.9 million, or $1.13 a share, during the first nine months of 2007. Sales rose 1.9 percent to $1.01 billion from $993.8 million.
The company’s 2009 lineup will include new products across every category of the flagship Revlon brand, as well as its most ambitious addition to the Almay franchise in two years, a five-item, naturally positioned, eco-conscious cosmetics line called Pure Blends that is rolling out to stores. Advertising for Pure Blends, designed to capitalize on the natural trend without compromising results, features actress Leslie Bibb.
Alan Ennis, executive vice president and chief financial officer, said Revlon’s first-half launches represent about a 50 percent increase in stockkeeping units, compared with the first half of last year, although the company acknowledged retail shelf space will remain unchanged.
Among the additional entries are: the Revlon Matte Collection fronted by actress Beau Garrett; Revlon Age Defying Spa Foundation and Concealer, an extension of the Age Defying franchise touted by model Elle Macpherson; Revlon Beyond Natural Blush and Bronzer, additions to the Beyond Natural line introduced in the second half of 2008; Revlon Creme Gloss, featuring Halle Berry in the ads, and the Enchantment seasonal color cosmetics collection. A slew of beauty tool introductions also are on deck, including Revlon Pedi-Expert, an at-home pedicure kit, and Revlon Pre & Post Tweezing Cream.
Over the last year, the company has ramped up its launch program and advertising support, but its market share has remained largely unchanged. In the quarter, the Revlon brand’s dollar share inched up to 13.4 percent from 13 percent in the prior-year period, boosted by the recently introduced ColorStay Mineral and Beyond Natural foundations. Revlon’s share has hovered around 13 percent since the fourth quarter of 2006. Almay’s dollar share, which has remained at 6 percent, dipped 0.2 percent in the quarter.
Asked if the 2009 launches will accelerate share growth, Kennedy said, “What we want is profitable growth over time and profitable share growth over time. We’re pleased with the share growth” on the Revlon brand.
Responding to the initiatives of its retail partners, namely CVS Pharmacy with its high-end concept Beauty 360, Shoppers Drug Mart’s Beauty Boutique, which is stocked with luxury brands, and Ulta’s advancement into prestige territory, Kennedy said, “Prestige brands along with mass brands can be very successful and can drive traffic.” He pointed to the success that Shoppers Drug Mart and beauty retailers throughout Hong Kong have had with a hybrid approach.