Revlon is blushingly close to bankcruptcy according to the WSJ.
It’s a salutary tale of a legacy cosmetics business with somewhat jaded brands that’s failed to adjust fast enough to a new paradigm: selling to the Instagram consumer. Amongst Revlon’s core portfolio of brands it’s noticeable that neither Elizabeth Arden nor Elizabeth Taylor are no longer alive.
The company’s sales dropped during the pandemic, and they had been in decline beforehand. Revenues in 2017 were $2.69bn and whilst they recovered slightly in 2021, to just nudge over $2bn, their trajectory speaks of deeper underlying issues.
Revlon’s big issue is its debt pile of $1.7bn, on which it is paying increasingly heavy interest payments. This burden has climbed steadily from $155m to $287m over the last 5 years.
Management has been fighting to restructure its brand portfolio and route to market model in response to the jump of online.
In 2021 it launched Elizabeth Arden DTC sites in Spain, France, Germany and Australia. But are these too little, too late?
The higher interest payments compounded by declining revenues have made it harder to reinvest in advertising, new brand development and R&D, the lifeblood of a thriving cosmetics business.
I was surprised that 15% of Revlon’s worldwide sales are through Walmart. Walmart is a bigger business for Revlon than either China or the UK for example and is acknowledged as a strategic risk in the annual report. It’s a moot point whether Walmart fits the profile for today’s young cosmetics shopper.