REVLON CUTS FIRST-QUARTER LOSS

Byline: Thomas J. Ryan

NEW YORK — Tight cost controls helped Revlon Inc. trim its first-quarter loss to $27.9 million from $34.2 million.
Sales increased 6.1 percent to $468 million from $441.1 million.
The loss, which matched analysts’ forecasts and marked the mass cosmetics giant’s fifth straight quarter in the red, was due to its high debt, with interest expense at $39.4 million in the latest quarter versus $35.9 million a year ago.
Revlon’s EBITDA (earnings before interest, taxes, depreciation and amortization), excluding business consolidation costs, rose 23.1 percent to $51.2 million from $41.6 million.
Jeffrey M. Nugent, president and chief executive since November, said Revlon is making notable progress in cutting costs, pruning inventory and reestablishing the brand in the market.
“We’re beginning to restore the company to financial health based on solid growth and prudent fiscal management,” Nugent told WWD. Operating expenses shrank to 59.6 percent of sales from 61.8 percent, and inventories were cut by 21.1 percent to $219.5 million.
U.S. sales grew 9.8 percent to $273.4 million with the aid of new products such as Revlon ColorStay LipSHINE, Revlon ColorStay Stick makeup, and Revlon Age Defying Lifting makeup, as well as Almay One Coat Lip Cream, Almay Light & Easy makeup, and Almay 3-in-1 Stick makeup. International sales rose 1.3 percent to $193.7 million — 4.7 percent on a constant dollar basis — led by a “stronger performance” in Europe and improvement in Brazil and Mexico.
Market share grew over the previous quarter, but Nugent said some erosion may still occur as Revlon shifts from a “push-through” to a “pull-through” marketing stance to focus on demand.
“It’s clear we’re trying to drive consumption, and in the short term there will be some remaining share compression, but in the long term we expect to exceed previous levels of market dominance,” he said.
Revlon recently slipped from first to third place behind Maybelline and Procter & Gamble’s Cover Girl.
Revlon plans to spur growth through third-quarter launches of Revlon and Almay skin care and hair lines, closely working with major accounts at point-of-sale, and redirecting spending toward more productive marketing.
Nugent said Revlon’s liquidity “is up dramatically” and debt reduced by over $300 million through the sale of its professional products division. Further debt reduction will come from the pending sale of its business in Argentina.
“We’re confident that we will make the EBITDA commitments for the year,” said Nugent. “We’re in much better shape financially.”
Some analysts were frustrated that Revlon refused to exclude operating results of the professional products division in order to provide a clearer picture of the operating company on an ongoing basis, but they generally said Revlon appears to be on the mend.
“There are some promising signs, but it’s a little too early to say everything is on track,” said Al Alaimo, a debt analyst at Banc of America Securities.
Nugent declined to predict when Revlon would return to profitability.
“I think the new Revlon is really something we want to make a reality, and we realize it’s going to take a number of successful quarters to reestablish that credibility with employees, Wall Street, our trade partners and our consumers,” he said.
“But I’m encouraged by the reservoir of positive energy from all of them.”