Revlon said hefty restructuring charges and unfavorable currency exchange rates pulled its second-quarter profits down 99 percent to $200,000, or breakeven on a per-share basis, in the period ended June 30, from $19.9 million, or 39 cents, in the prior-year quarter. Current-quarter results included restructuring charges of $18.3 million or 36 cents a share, and foreign currency losses of $3.3 million.
Quarterly sales slid 12.2 percent to $321.8 million from $366.5 million. In the U.S., revenue declined 14 percent to $186.2 million, driven primarily by lower sales of Revlon and Almay color cosmetics. International sales fell 9.7 percent to $135.6 million, due in part to lower sales in Europe and currency fluctuations, which were offset by higher sales in Latin America and Asia.
For the first half, Revlon had a 25.9 percent drop in profits to $12.9 million, or 25 cents a share, versus $17.4 million, or 34 cents, in the 2008 period. Sales dipped 7.8 percent, to $625.1 million from $678 million.
Alan Ennis, president and ceo, said the restructuring plan outlined in May, at a cost of 400 jobs, will reduce the company’s annual cost base by $30 million, half of which should be realized in the year’s second half. This “action represented an important, necessary and logical next step forward for Revlon,” enabling it to become a “stronger, more financially sound organization,” he said.
Although Wall Street took kindly to Revlon’s results — with shares jumping 42 cents, or 7.4 percent, to $6.08 — J.P. Morgan retail analyst Carla Casella, who rated the company “overweight,” remained cautious.
“High-end beauty manufacturers are beginning to target lower price points,” she wrote in a note to clients. “Revlon is introducing a number of new products in 2009, much of which has been shipped into stores already, raising returns risk if launches are unsuccessful.” She said the firm also faces a “modest refinancing risk in 2010 when a $107 million junior subordinated term loan comes due.”
Shiseido’s net income fell 57.8 percent to 4.32 billion yen, or $44.4 million at average exchange rates for the period, for the three months ended June 30. Sales declined 14.9 percent to 139.7 billion yen, or $1.43 billion.
The company said Thursday that during the quarter “consumer sentiment continued to weaken, causing market conditions in the domestic cosmetics industry to remain difficult. Overseas, the cosmetic markets in Europe and the Americas were affected by the economic recession, resulting in weak conditions overall.”
In a reduction of its guidance, the firm said net profit for the six months ending Sept. 30 is now seen coming in at 14 billion yen, or $147.9 million, compared with an earlier forecast of 15.5 billion yen, or $163.7 million. Full-year net profit is now expected to land at 30 billion yen, or $316.9 million, down from an earlier forecast of 31 billion yen, or $327.5 million.
The company said sales in its home market of Japan suffered as consumer sentiment weakened, competition intensified and retailers adjusted inventories. Shiseido’s cosmetics sales in Japan slid 6 percent to 90.4 billion yen, or $928.7 million.
The rest of Asia, and especially China, turned in a “solid performance,” Shiseido said, although the recession and the appreciation of the yen bit into business in Europe and the Americas. International cosmetics sales slid 25.9 percent to 46.9 billion yen, or $481.3 million.
Last week, Shiseido’s rival, Kao Corp., said first-quarter net profit slid 31 percent to 11.8 billion yen, or $121.19 million. Sales decreased 9.4 percent to 287.21 billion yen, or $2.95 billion.
In Tokyo, Shiseido’s shares closed up 0.6 percent to 1,563 yen, or $16.51 at current exchange.
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