Revlon Inc. reported its year-end results against a backdrop of changes, including the acquisition of The Colomer Group, an executive shuffle and the exit from China.
The beauty firm slid to a loss in the fourth quarter ended Dec. 31, dragged down by its retreat from China. The company on Wednesday reported a net loss of $33.1 million, or 63 cents a diluted share, compared with net income of $46.5 million, or 89 cents a share, in the year-ago quarter. Revlon recognized a $24.1 million loss from discontinued operations in the three-month period, compared with a net loss of $2.1 million from discontinued operations in the year-ago quarter, both primarily related to the firm’s decision to exit China. Revlon said the move would achieve annual savings of $11 million.
The company’s net sales in the quarter gained 28 percent to $491 million, compared with $383.5 million, boosted by the acquisition of Colomer. Excluding the impact of foreign currency exchange, net sales rose 31.2 percent.
Presiding over his first earnings call at the company, Revlon’s newly installed president and chief executive officer Lorenzo Delpani said together, Revlon and Colomer achieved sales of $1.9 billion in 2013. “We are reaching the $2 billion mark,” said Delpani, who joined Revlon through the Colomer acquisition and took the helm on Nov. 1.
“The refreshed company vision is to establish Revlon as the quintessential and most innovative beauty company in the world by offering products that make the consumer feel attractive and beautiful. This sounds or may sound like a bold statement or quite ambitious, yet we mean it,” said Delpani. “We are here to win and we are here to make it happen. Through this mission, we will generate value for our shareholders.”
Delpani told shareholders the company expects synergies from the integration of Colomer to yield between $30 million and $35 million in cost reductions by the end of 2015.
Citing his fondness for the phrase “fewer, bigger, better,” Delpani also acknowledged that there will likely be both divestitures and acquisitions in the future. “It’s part of the portfolio cleaning exercise,” Delpani told Wall Street analysts. He noted that his focus on “fewer, bigger, better” extends to brands, geographies and people. That said, Delpani has wasted little time in putting together his management team.
“The team I have in place is a very strong team,” said Delpani. “I am almost done,” he added, alluding to several more changes. Since he assumed the top post, both Chris Elshaw, Revlon’s former executive vice president and chief operating officer, and Julia Goldin, former global chief marketing officer and senior vice president, have decided to leave the company. In Elshaw’s place, Delpani has recruited former Alitalia executive Gianni Pieraccioni as executive vice president and global president of the Revlon consumer division, and promoted Sennen Pamich to the post of executive vice president and global president of Revlon. Following Goldin’s departure, Javier Asarta, the current cmo of the professional business, is leading the Revlon consumer marketing team in the interim.
When asked what skills he looks for in an executive, he said, “Achievement, innovation and drive. I call this AID.”
Delpani said the management team has spent the last three months focused on the integration of Colomer.
As part of those efforts, Revlon reports sales in both the consumer and professional segments. For the quarter, consumer segment sales declined 2.4 percent to $374.2 million, compared with $383.5 million, and professional sales since the Oct. 9 acquisition were $116.8 million. The segment includes brands such as Revlon Professional in hair color, hair care and hair treatments; CND in nail-care products, and American Crew men’s grooming products.
For the year, Revlon reported a net loss of $5.8 million, or 11 cents a diluted share, compared with net income of $51.1 million, or 98 cents a share. The results of discontinued operations, primarily relating to the company’s operation in China, were a loss of $30.4 million, compared with a loss of $10.1 million in 2012. The 2013 loss includes $20 million of restructuring and related charges related to Revlon’s decision to exit China.
The company’s net sales in 2013 gained 7 percent to $1.49 billion, compared with $1.4 billion in the prior-year period. Excluding the impact of foreign currency exchange, net sales rose 9.6 percent. By segment, consumer sales declined 1.3 percent to $1.38 billion, compared with $1.4 billion. Professional sales since the acquisition were $116.8 million.