Problems with its North Carolina manufacturing plant, and steep declines in fragrances, drove Revlon Inc.’s numbers down in the second quarter.
The problems at the Oxford, N.C., facility, which affected Revlon’s previous quarter as well, are expected to impact the business throughout the remainder of the year, executives said on Revlon’s earnings call Thursday.
“We have resolved the fundamental issues,” Revlon’s new chief executive officer, Debbie Perelman, told Wall Street analysts. But the business ultimately suffered from inventory depletion that is taking a while to fix and affecting numbers in a big way. If the plant problems were removed from the equation, as well as costs associated with the company’s reacquisition of certain trademark rights associated with Elizabeth Arden, Revlon’s net sales would have been down slightly, and operating profits would have been flat, Revlon chief financial officer Victoria Dolan said on the call.
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Those expenses caused the business to post a 6 percent net sales decline for the second quarter, with $606.8 million in net sales for the three months. Revlon also posted a net loss of $122.5 million — 235 percent greater than the prior-year period’s $36.5 million loss. Diluted loss per share was $2.32, compared to 46 cents for the second quarter of 2017.
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While Revlon’s results were affected by the problems in its Oxford, N.C., manufacturing plant, numbers were also down because of losses of licenses in the fragrance segment. Those declines were offset by growth from new products from the likes of Almay, and the global expansion of Elizabeth Arden.
Flesh, Revlon’s first incubated brand in the modern era, has “seen a lot of momentum” in its first six weeks since launch, Perelman said. “What’s really resonating with the consumer, we believe, is the fact that we’re speaking to inclusivity and we’ve launched with such a large shade range on the foundation, as well as very specific ancillary products,” Perelman said. “What we do see working is the partnership with Ulta, as well as our ability to reach consumers on digital.”
For the quarter, Revlon brand sales dipped 10.8 percent, to $258.3 million. The business experienced lower sales of Revlon makeup as well as Revlon ColorSilk hair color, primarily because of the manufacturing problems. Revlon also cited “consumption declines in North America.”
Perelman also noted that Revlon is being “received well” in China, and that the business is “exploring opportunities to launch in the brand in China” and has “begun exploring the registration process for our products.” She declined to give more specifics on timing. Revlon previously exited China in 2014, citing cost savings and declining sales.
Right now, Arden is leading sales for Revlon Inc. in the Chinese market, Perelman said.
For the quarter, Arden sales were up 4.9 percent, to $106.1 million, driven by higher sales of skin-care products such as Ceramide and Prevage. The portfolio brands segment, which contains Almay and CND, posted a 2.9 percent sales increase, to $147.6 million. That jump was caused by higher sales after Almay’s relaunch, as well as higher sales for CND following the release of a new Shellac nail polish innovation.
Fragrances posted the largest decline — 15.1 percent — to $94.8 million in sales.
“Our strategy continues to focus on strengthening our brands and enhancing the avenues through, which we communicate and connect with our consumers,” Perelman said in a statement. “We are focused on ensuring broad availability of our products where the consumer shops in both brick-and-mortar and online. We are seeing strong growth in e-commerce and innovation, including a very positive response to the launch of Flesh, our new in-house incubated brand.”