revlon elizabeth arden merger

Revlon Inc. is slimming down its corporate structure — and Wall Street heartily approved.

Shares of the beauty empire surged Friday, closing up 31.24 percent to $28.61 after the company unveiled a program to save between $125 million and $150 million a year by the end of 2019.

“Looking forward with the announcement of our 2018 optimization program, we are now reallocating and realigning our resources to build new capabilities in higher-priority growth areas, as well as driving operational efficiencies to reduce our cost base,” said Debra Perelman, Revlon president and chief executive officer. “While this will lead to some headcount reductions, it is essential that we maximize the productivity of our resources across our businesses so that we can fully realize the benefits of our growth strategy in the future.”

A representative from Revlon declined to comment on the number of jobs that will be eliminated.

The streamlining includes three main pillars.

• The optimization of the global supply chain to achieve manufacturing efficiencies and a tighter warehouse network.

• An effort to boost in-market execution by adjusting the company’s commercial and organizational structures.

• The reduction of overhead costs and a streamlining of functions that will use technology, shared services and standardization of processes to become more agile and faster when making decisions.

Perelman took the helm at the company in May and has clearly gotten right to work.

Revlon reported third-quarter sales dipped to $655.4 million from $666.5 million a year earlier. Still, the company’s losses narrowed to $11.1 million from a deficit of $32.4 million a year earlier. The company credited a higher operating income, along with tax breaks, for bottom line improvement.

Inventory problems at the company’s Oxford, N.C., manufacturing plant persisted during the quarter. Chief financial officer Victoria Dolan told analysts on a conference call that the difficulties cost the company about $12 million in international sales, “due to the long lead times associated with filling some international geographies.”

The company also struggled with its namesake brand, which saw sales fall 2 percent in the quarter, driven by a decline in Revlon color cosmetics.

The fragrance business also continued to struggle with sales slipping to $145.4 million from $159.3 million despite a number of celebrity collaborations, including My Prerogative by Britney Spears, Violet Noir by Christina Aguilera and KZ and J, a collaboration between John Varvatos and Nick Jonas.

On the plus side, the company’s Elizabeth Arden shined during the quarter. Sales of Elizabeth Arden products increased 16.5 percent year-over-year, boosting the brand’s profits to $7 million, up from $2 million. Revlon credited the brand’s skin-care products and an increase in sales internationally.   

Flesh, Revlon’s prestige-priced makeup brand that was launched in June and is for sale only at Ulta Beauty, was another driver.

“We’re seeing that it is doing what we expected it to do and more with regards to the digital engagement, as well as attracting the young Millennial consumer,” Perelman said during the conference call. “Currently, I’m not going to comment on any expansion with Ulta, but what I will say is we’re very pleased with the results, both in-store and online.”

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