Revlon’s Developments So Far In 2016 And Their Implications

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2016 is almost drawing to an end and Revlon has experienced an eventful year so far. After a lackluster 2015, Revlon’s largest controlling shareholder, Ron Perelman, declared the intention to be searching for strategic alternatives for the beauty company towards the beginning of 2016. Below are some of the key strategic initiatives undertaken by the company in 2016:

  • Revlon announced Fabian T. Garcia as its new President and CEO in March 2016. Prior to Revlon, Fabian had worked with Colgate Palmolive, where he was most recently the Chief Operating Officer of global innovation and growth.
  • In April, Revlon announced Juan R. Figuereo as its new Executive Vice President and Chief Financial Officer.Mr. Figuereo comes from NII Holdings, Inc.where he most recently held the same positions.
  • Revlon acquired the nail brand, Cutex International business from Coty in June. The Cutex International business mainly operates in the U.K. and in Australia. Revlon already owned a part of Cutex and with this acquisition, Revlon completed the global consolidation of Cutex’s worldwide operations under its own brand portfolio.
    • Revlon aims to redesign some of Cutex’s nail care products and expand the portfolio of offerings so that it appeals to a wider customer base.
    • Nail care brands fall under Revlon’s color cosmetics segment. Color cosmetics have contributed to around 55% to 65% of Revlon’s revenues since 2011 and is expected to do so in the future as well.
  • Shortly after its decision to acquire Cutex, Revlon decided to acquire global prestige beauty company, Elizabeth Arden. The takeover, that was completed in September, is being touted as an attempt to revive both the beauty companies, which have been losing their popularity, lately. With the acquisition of Arden, Revlon will step into the premium beauty segment.
    • The global prestige beauty segment had regained its popularity in 2015 after several years of lackluster demand, mainly due to the importance of skincare among the Millennials. Currently, fragrance is outperforming skincare. The U.S. prestige beauty market grew by 7% Y-o-Y to reach $16 billion in 2015. Arden sells premium makeup, skincare, and a range of licensed prestige fragrances under names such as Elizabeth Taylor, Britney Spears, and Taylor Swift.
    • Along with expanding its offerings into the luxury segment, Arden will also help Revlon to enter channels such as travel retail–one of the most popular distribution channels for luxury beauty items. Also, Arden’s geographic reach in important regions such as Asia Pacific will further boost Revlon’s global footprints.
    • The most interesting change in Revlon’s portfolio mix is expected to be the contribution of the fragrance segment. The role of fragrance in its category mix will increase from 4% to around 28%. This increased dominance of fragrance is expected to increase Revlon’s market share in the global antiperspirants, deodorants, and fragrance market. This has the potential to significantly increase Revlon’s stock price valuation.
    • According to a previous statement by Fabian Garcia, this deal will place Revlon among the top 20 global beauty companies.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Revlon