Revlon stocks continue to tumble
dramatically following the cosmetic player's earlier forecast for
lower than expected growth for this year on the back of
disappointing sales on products aimed at older women.
Today shares have hit another record low, currently trading at $1.27 in an increasingly volatile worldwide market that is spelling troubled times for the company.
Financial experts were concerned when shares hit a record low at the end of last week dipping below $1.65 per share, having averaged over $3 a share so far this year, but with the financial markets currently under-performing, it seems that Revlon's announcement could not have come at a worse time.
In a press statement the company said that it was expecting strong growth during the course of 2006, although sales were expected to be lower than first thought.
The company said that this reflected lower than expected sales from its newly launched Vital Radiance line and its Almay brand, due to competitive activity.
Revlon was pinning particularly big hopes on its Vital Radiance cosmetics line as it targets women in the 50-plus category - currently a huge growth market. However, increased competition from all the big players in this category has meant that the line's anticipated success has not been fulfilled.
"Our initiatives are delivering significant incremental revenue growth in 2006, although they are requiring significant levels of investment to build consumer awareness and trial particularly of Vital Radiance - due in part to the heightened competitive environment," said Revlon president and CEO Jack Stahl.
Financial analysts have said that they would be maintaining an 'underweight' rating, indicating that the key drivers of the lower outlook as the main reasons.
The company, which is controlled by billionaire financier Ronald Perleman, said it would delay a planned $75m stock sale until the end of 2006 or the beginning of 2007, as well as deferring a previously announced refinancing of its credit facility.
The company also indicated that it no longer expects a 12 per cent operating margin by the end of 2008, despite progress being made in cost of goods and administrative expenses as part of its current restructuring plan.
Revlon's recent performance is a disappointment, following a marked revival in the fourth quarter of last year, when it reported that profits were up 38 per cent on the back of strong sales of its Almay and Vital Radiance sales.However, a few months can be a long time in the cosmetics world, as companies bring products to the market faster and faster in response to specific market demands.
In recent months big names such as L'Oreal's Maybelline and Paris lines, together with brands from Lancome and Coty all chasing this market have all gone into overdrive marketing cosmetic products specifically at older women, creating an ultra-competitive market.
