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Estee Lauder and Revlon both post big profit drop

By Simon Pitman , 09-May-2006

Two of the leading cosmetic players in the US have simultaneously posted a big drop in their profits as they are hit by costs associated with restructuring plans that aim to shape up the businesses.

Cosmetic and fragrance manufacturer Estee Lauder reported that its third quarter net earnings dropped 44 per cent to reach $59.5m, compared to a year earlier, when earnings stood at $106.2m.

The company said that the figure had been impacted by a $3.7m charge relating to the sale of its Stila business as well as heavy restructuring charges.

 

Meanwhile the company's net sales continue to pick up, rising 3.5 per cent to reach $1.578bn. The company reported a particularly strong increase in sales for its hair care division, which rose 19.3 per cent to reach $80.3m due to good Aveda and Bumble and bumble sales.

 

Given these figures the company said it believed that full year sales would increase by 3 per cent, with the Asia/Pacific and European markets expected to lead the way.

 

Meanwhile rival company Revlon continues to struggle, as it reports net losses increased from $46.8m in the corresponding quarter ending last March, to reach $58.2m for the most recent quarter.

 

Again an increase in revenue was offset by higher restructuring costs, together with higher operating costs. Costs from restructuring were put at $9m for the three months.

 

Net sales rose by 8 per cent to reach $326m, compared to $301m in the previous year's quarter. Its mainstay skin care division only rose by 0.5 per cent to reach $611.1m. Although sales of new lines were said to be good, existing lines declined, largely offsetting the gains.

 

Revlon said that a continued effort to improve the company's balance sheet and cut back on its debts should see its accounts take better shape during the course of the year.

 

Likewise spending on it new Vital Radiance line and a revamp of its Almay line is expected to pay off in the next few months, as future revenue gains from the two lines push up net sales for the full financial year.

 

Currently the company's long-term debt stands at $1.3bn, compared to $1.41bn one year ago.

 

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