REVLON NET SOARS IN QUARTER

Byline: Diane E. Picard

NEW YORK — Crediting the strength of its Revlon and Almay brands, Revlon Inc. said third-quarter earnings surged 57.6 percent to $33.1 million, or 65 cents a share, easily beating Wall Street estimates of 61 cents.
Results for the latest quarter include a $1 million gain related to business consolidation. In the 1996 quarter, Revlon earned $21 million, or 41 cents. Sales for the three months ended Sept. 30 increased 9 percent to $623.5 million from $571.7 million.
Brenda Landry, an analyst with Morgan Stanley, noted that while the quarter earnings beat her estimate of 60 cents, sales fell short of the $641 million she had expected.
Revlon stock slumped 3 7/16 to 38 Wednesday on the the New York Stock Exchange.
“Sales were slower due to the consolidation of the chain drugstore business, the slower expansion of the Ultima II line into chain drugstores and the slower pace of the mass fragrance business,” she said.
As a result, Landry lowered her fourth-quarter estimate to 87 cents a share from $1.04. Revlon earned 60 cents last year. For the full year, she lowered her estimate to $1.20 from $1.32. In 1996, Revlon earned 36 cents a share, after a $6.6 million charge for early debt retirement.
Landry said she expects the company’s 1997 revenues to be about $50 million less and operating profits to be $11 million lower than last year, as Revlon’s fragrance business continues to slow down.
Looking at the company’s performance in the third quarter, George Fellows, president and chief executive officer, conceded in a statement that the company’s profits and sales in fragrances had declined and that this trend would continue into the fourth quarter. He said the company planned to deemphasize the fragrance business and concentrate on its cosmetics business.
A Revlon spokeswoman stressed, however, that the company will continue to market its core fragrance brands, such as Charlie and Fire & Ice.
“Growth in the color cosmetics category,” Fellows stated, “increases in market share and expanded distribution in self-select doors overseas contributed to the quarter’s results.”
He said both the Revlon and Almay brands continue to gain momentum and increase market share as the “number one U.S. mass color cosmetics brand.”
Fellows said the Revlon brand currently holds 22.3 percent of the U.S. mass cosmetics market, compared with 21.6 percent in the prior year’s quarter. Fellows was quoting figures from the A.C. Nielsen market research firm. He also cited the successful introduction of ColorStay Haircolor to the ColorStay cosmetics franchise.
Lynne R. Hyman, an analyst with CS First Boston, confirmed that Revlon has no intention of phasing out its fragrance business. However, the company will downplay the segment.
“Revlon will stop promotions, stop introductions and stop spending time on that segment,” she said.
Hyman said Revlon expects to regain $6 million of the $12 million decline in 1997 operating profits in its core business operations.
At Morgan Stanley, Landry noted the company plans to launch a MoistureStay lip color line in early 1998.
Even though consumer sell-through of Revlon and Almay has grown by double digits, the company’s sales to its customers have been and may continue to be hurt by retail inventory balancing and reductions resulting from consolidation in the chain drugstore industry, Fellows said.
In the U.S., sales grew 12.7 percent to $389 million.
For the nine months, Revlon earned $2.2 million, or 4 cents a share, after a $14.9 million charge for early debt retirement. The latest period also includes an $8.4 million charge related to business consolidation, partially offset by a $6 million gain from the sale of a subsidiary’s stock.
In the 1996 nine months, Revlon reported a loss of $13.1 million, after a $6.6 million charge for early debt retirement. Sales were ahead 8.5 percent to $1.68 billion from $1.55 billion.