Revlon Stems the Tide: Beauty Firm Returns to Black in 4th Quarter

Revlon Inc. found find its way back to positive quarterly earnings territory for the first time in six years, after reining in costs.

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The company’s efforts to lower costs and eliminate other expenses ultimately fueled the return to the black. Cost of sales declined 240 basis points in the quarter to 34.9 percent of sales, or $131.9 million, compared with 37.3 percent of sales, or $137.3 million, in the year-ago period. Selling, general and administrative expenses were reduced by 700 basis points to 44.5 percent of sales, or $168.4 million, compared with 51.5 percent of sales, or $189.6 million, a year ago. Interest expense fell 38.3 percent to $28.4 million from $46 million.

For the year-end period, the loss narrowed to $142.5 million, or 47 cents, from a loss of $153.8 million, or $2.47 a share, in 2003 while sales declined 0.2 percent to $1.3 billion.

North American sales declined 3.9 percent to $855.7 million, compared with sales of $890.6 million in the previous year. For the year, Revlon and Almay’s combined market share fell to 21.5 percent from 22.3 percent in 2003, according to the ACNielsen data.

For the year, international sales rose 8 percent to $441.5 million. Excluding the positive effect of currency exchange rates, international sales rose 1 percent.

For the year, SG&A expenses fell 400 basis points to 55.3 percent of sales, or $717.6 million, from 59.3 percent of sales, or $770.9 million, in 2003. Interest expense declined 25 percent to $130.8 million from $174.5 million.

During the conference call, Stahl said the next phase in the company’s turnaround campaign will center on reinvesting in the company. Stahl explained that the firm spent the better part of 2003 overhauling its product development process and go-to-market strategy, which in turn caused 2004 to be a transition year. Products born out of the new “cross-functional system” — which melds research, development and marketing — began to hit the market in January. Stahl said new products, such as Fabulous Mascara and ColorStay 12-Hour Eye Shadow, are off to a good start.

Breathing new life into established brands is also a priority going forward. “We addressed a critical need to reposition several of our key franchises, which had been undermanaged and undersupported for a decade or more,” said Stahl, singling out Revlon Super Lustrous Lipstick, Revlon Nail Enamel and Revlon Age Defying in particular as products that had already received more attention.
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