Revlon’s Q2 2017 Earnings Review

by Trefis Team
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Though Revlon’s second quarter hasn’t been a breakthrough in terms of the growth in its top line on a pro-forma constant currency basis, yet Revlon’s initiatives seem to be pointing towards better days to come. The company seems to be doing better in its international markets than the North American markets. Finally, its Elizabeth Arden brand seems to be performing well with new launches and a strong digital presence.

In line with the pro-forma sales decline of Q1 2017, Revlon’s Q2 sales also declined by 5.3% y-o-y on a pro-forma basis and stood at $645.7 million. However, its reported net sales increased by around 32% which was mainly due to the Elizabeth Arden acquisition. Revlon’s flagship brand grew in terms of comparable net sales driven by healthy performance in the color cosmetics and hair color segments in markets such as Asia, Europe, and Latin America. Revlon’s growth in the international markets continued strongly with an 8% pro-forma constant currency growth rate, the main contributors for which were the double digit growth in Asia and Latin America, and a robust growth in Europe. The company is on track to attain integration synergies to the tune of $190 million by 2020, with approximately $14 million in synergies realized in the second quarter and around $24 million year-to-date.

Elizabeth Arden Showed Impressive Growth With New Launches And Digital Presence

Elizabeth Arden witnessed its 10th consecutive quarter of net sales growth due to new product launches, an important one among which was the renovation of its Ceramide brand that is currently growing in double-digits and is Arden’s largest global franchisee. Another important development for Arden was the launch of its White Tea fragrance, which is among the top five brand new women’s fragrance launched year-to-date, as well as the strong performance in its PREVAGE brand. Elizabeth Arden witnessed double digit growth in China and in the travel retail segment. Other than that, it also grew in Northern Europe, South Africa, Spain, Korea, Hong Kong, and the U.K.

Revlon’s presence in the e-commerce arena is still not strong enough and hence it is trying to enhance its digital presence in the U.S. and other important markets. Elizabeth Arden on the other hand, continued with its double-digit growth in the digital space in regions such as the U.S., U.K., and China.

How Is Revlon Increasing The Appeal Of Its Products?

Similar to other beauty brands, Revlon is also trying to strengthen its presence and make its brands more relatable among the younger beauty users. Almay has been repositioned to emphasize the qualities of uniqueness, inclusiveness, and self expression and that, in turn, has been received well by the millennials. A lot of brands are undergoing makeovers to appeal to the younger beauty users. Though some new launches are slated for the second half of 2017, the customers will see the complete makeover of all its brands across segments by Q1 2018. Revlon’s investments will continue to not only modernize the brands, but also to expand their geographic presence and diversify the product portfolio so that customers with different purchasing powers can afford the products. For example, in Q2, Revlon’s color cosmetics reentered Germany, which is the sixth largest beauty region in the world and now Revlon is present across 1,600 new stores in Europe. Revlon has partnered with a leading digital consulting firm to improve its digital presence, as well. For hastening its product development processes, the company has hired an expert from the beauty industry last month and also partnered with third-party manufacturers. The second half of 2017 is set to be one of the strongest for Revlon in terms of new product launches.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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
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