Revlon narrows losses and aims growth at color cosmetics and seniors

By Simon Pitman

- Last updated on GMT

Related tags: Color cosmetics, Stock market, Revlon

Although the company's sales for the quarter only grew by 1 per
cent, the performance was boosted by favorable exchange rates, as
the company announces a future focus on color cosmetics and seniors
to maintain the momentum.

One of the leading players in skin care, fragrance and personal care, Revlon​ reported that net sales rose to $318.3 million, from $316.1 million for the quarter a year earlier. The favorable state of the financial market, combined with the small jump in sales meant that net losses were reduced by 8 per cent to reach $35.8 million.

But despite the results looking stronger the financial world has reacted negatively to the results, with share prices dropping from a high of $4.25 to hover at around the $3.75 mark since the results were published on August 4.

The down turn in share price reflects the fact that the performance was not in line with their expectations. Analysts surveyed by Thomson first call had predicted that losses would be narrowed to 9 cents a share, when in fact they came in at 11 cents a share, compared to the previous year.

In an effort to drive itself back into profitability, the company also announced that it was launching two initiatives that aim to significantly accelerate growth and to specifically build on its position as a leader in the mass market color cosmetics category.

The company said that one of the initiatives would focus on its Almay brand and its 'unmet needs for simplicity and healthy beauty', as well as building on the existing success of the brand.

The second initiative focuses on the mature consumer, a segment that Revlon say is 'underserviced by existing cosmetics offerings'.

"We have developed a full range of products specifically for this important group of women who have told us that their current products no longer work for them. To address this, we are introducing the ideal cosmetics system, products and shades for her changing skin,"​ said Stephanie Peponis, Revlon executive vice president.

Revlon CEO, Jack Stahl, said that the company would now remained focused on reducing costs, adding that a strong top-line outlook, coupled with the potential to strengthen operating margins, positioned the company well to achieve long-term profitability.

The company said that looking to the next two quarters for the financial year, 3Q is expected to be impacted by a provision for returns, where as Q4 is expected to benefit from new product launches, the affects of which is also expected to be felt in the first quarter of 2006.

Overall the initiatives are expected to have a significant impact on future revenues, both for the remaining two quarters of 2005, but EBITDA is expected to remain flat. In 2006, revenues are predicted to continue with strong growth, which will then start to have a more positive impact on EBITDA.

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