Revlon Had A Successful Third Quarter And Expects More Growth In The Future

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Revlon (NYSE:REV) presented a healthy Q3 2015 on November 4th. On a constant currency basis (XFX basis), the adjusted net sales grew by 6.8% . Reported net sales for the company were $471.5 million reflecting almost 2% year-over-year decline. Revlon’s growth was the result of its strong performing brands, brand support activities, and strategic investments. However, Revlon’s net income experienced a 58% decline to reach $6.2 million in Q3 2015. This decrease was primarily due to higher taxes on account of a higher pretax income, some favorable items in the same period of 2014 that didn’t repeat in 2015, and an increase in the valuation allowance related to some assets in the U.S. [1] [2]

Revlon’s adjusted EBITDA grew by 8.7% on an XFX basis (~3% in reported terms) to $87.6 million despite an investment of $4.7 million towards brand support during the third quarter.

We will shortly update our current price estimate of $34 for Revlon’s stock.

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See Our Complete Analysis For Revlon Here

Revlon’s Divisions And Acquisitions Performed Well In The Third Quarter

Revlon’s consumer segment sales increased by 5.9% year-over-year on an XFX basis to $348 million. The growth drivers were higher net sales of Revlon color cosmetics, Revlon ColorSilk, and Mitchum products. On an XFX basis consumer segment profit increased by 17.6%.

Revlon’s professional segment sales increased by 1% on an XFX basis to $115 million. The growth was boosted by higher net sales of Creme of Nature, American Crew, and Revlon Professional hair products. On an XFX basis, professional segment profit was essentially flat. This was because despite the strong performance of most of the brands in this segment, the growth was offset by the CND domestic.

Revlon has further plans of expansion and development for its second quarter acquisition, U.K. based fragrance company CBBeauty (CBB). However, till now the company is pleased with the returns from CBB.

Brand Support Activities Might Lessen In The Coming Quarter

In the first nine months of 2015, the company has spent almost $36 million more in brand support versus 2014. Revlon is investing in channels such as media, more store activation, and promotional activities in the stores.  Revlon is also trying to expand its geographical presence where it is progressing aggressively post its acquisition of The Colomer Group (TCG) and currently post CBB, it is also expanding in the U.K. with respect to fragrance labels. The company us launching new brands in regions like Australia or Japan. However, the majority of the investments had been completed through the third quarter, and investments are expected to be reduced in Q4.

Creating Brand Awareness And Value: Revlon’s  Key To Success 

The company is currently very active in creating brand awareness for itself. In September, it launched the Revlon Love Is On $1 million Challenge. The challenge was regarding women’s health charities and raised a total of $4 million in donations from the public and from Revlon. Revlon also launched the Love Test video which received over 25 million views in under two weeks. Revlon recently launched a new fragrance and some makeup products in the travel retail channel.

We feel these initiatives will help the company grow even further. Revlon has been an adaptable company over time and its strategic investments have helped the company grow steadily despite the presence of beauty giants in the industry. You can read more about Revlon’s growth story, here.

 

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Notes:
  1. Revlon’s (REV) CEO Lorenzo Delpani on Q3 2015 Results – Earnings Call Transcript, Seeking Alpha, July 29, 2015 []
  2. Revlon Form 10-Q For The Quarterly Period Ended Sep 30, 2015 []