Key Takeaways From Revlon’s Q4 Earnings

by Trefis Team
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Revlon (NYSE: REV) reported its Q4 2017 earnings on March 15, where its top line slightly declined to $786.6 million, down 1.8% compared to the prior year period, primarily driven by sales declines in North America, partially offset by growth in international sales specifically within the Elizabeth Arden segment.

For full year 2017 as well, the inclusion of the Elizabeth Arden segment increased the company’s net sales by 15.4% y-o-y to $2,693.7 million. Revlon’s Elizabeth Arden brand has performed well this last year driven by new launches and a strong digital presence. Driven by the acquisition of Elizabeth Arden, Revlon is on track to attain integration synergies of $190 million by 2020, with delivering $69 million of synergies and cost reductions for the year ended December 31, 2017.

Also with the recent inductions made in Revlon’s top management the company is positive that the new changes will steer Revlon towards the path of growth. Please refer to our dashboard analysis on Revlon.

Key trends from Revlon’s fourth quarter earnings are outlined below:

Segment-wise performance in Q4 – In Q4, Consumer segment net sales decreased by 3.2% y-o-y to $355.7 million, driven by sales declines in Almay color cosmetics as a result of higher returns, partially offset by growth in net sales of Revlon color cosmetics.  Elizabeth Arden net sales increased by 2.3% on a y-o-y basis to $313.2 million  compared to the prior-year period,  driven by higher net sales of Elizabeth Arden branded skin care and fragrances internationally, offset by lower net sales of designer and celebrity fragrances, primarily within the U.S. mass retail channel.

Professional segment net sales decreased by 6.3% y-o-y due to continued weakness in net sales of American Crew men’s grooming products.

Growth in International Markets – Total International Sales of the company saw a y-o-y increase of 7.9% in Q4 driven by Elizabeth Arden and Professional segments. Driven by this growth in international sales, the company’s share of revenue from the U.S. market has been gradually declining. Consumers in the region have shifted loyalties to specialty beauty retailers or online purchases. However, importance of this market for its business despite the negative trends is not lost on Revlon.  The international business, on the other hand is seeing major growth from the Asia Pacific region.

Digital Initiatives – Revlon is focusing on digital and e-commerce initiatives by setting up a new team of digital professionals.  Along with increasing ad investments, the company is also shifting most of its campaigns to the digital platform.  Revlon collaborated with a leading digital consultancy, Sapient Razorfish, to create a stronger digital presence. These factors positively impacted results as an increasing number of customers are buying beauty products online.

Outlook for fiscal 2018

Revlon is expected to reap stronger results from the Elizabeth Arden integration and thus post healthy results in the current fiscal year.


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