Key Takeaways And Trends From Revlon’s Q1 Results

by Trefis Team
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Revlon (NYSE: REV) reported its Q1 earnings on May 10, where its top line declined to $560.7 million, down 5.7% y-o-y basis in Q1,  primarily driven by net sales declines in the Revlon, Portfolio, and Fragrances segments, with slight offset by net sales growth within the Elizabeth Arden segment. Revlon has also experienced a decline of $20 million in net sales due to service level disruptions at the Company’s Oxford, N.C. plant.

Revlon’s Elizabeth Arden brand has performed well this last quarter driven by new launches and a strong digital presence. Revlon is on track to attain integration synergies of $190 million by 2020, as it delivered approximately $5 million in restructuring and related charges in connection with implementing actions under the Elizabeth Arden Integration Program in Q1 and also realized approximately $17 million in incremental synergies and cost reductions during the period.

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 First quarter 2018 earnings are outlined below:

Segment-wise performance in Q1 – Effective January 1, 2018,  Revlon began to operate under a new brand-centric organizational structure built around four global brand teams and will now be reporting its results under four new segments: Revlon, Elizabeth Arden, Portfolio brands, and Fragrances.

Net sales for the Revlon segment decreased by 6.0% y-o-y to $229.1 million, driven by a downturn in the net sales of Revlon color cosmetics and Revlon ColorSilk hair color due to the impact of service level disruptions at the Company’s Oxford, N.C. manufacturing facility and consumption declines in North America.  Elizabeth Arden net sales, on the other hand, increased by 10.4% on a y-o-y basis to $105.7 million compared to the prior-year period, driven by an increase in net sales of Elizabeth Arden branded skin care products internationally.

Professional segment net sales decreased by 8.3% y-o-y in Q1 to $134.5 million due to weakness in net sales of American Crew men’s  grooming products  and Cutex nail care. Whereas Fragrances segment net sales decreased by 16% to $91.4 million y-o-y driven by the loss of certain licenses in 2017 and decrease in net sales of designer fragrances, including Juicy Couture and John Varvatos.

Growth in International Markets – Total International Sales of the company saw a y-o-y increase of 1.5% in Q1 driven by Elizabeth Arden and Revlon segments. The international business is seeing major growth from the Asia Pacific region. On the other hand, the company’s share of revenue from the U.S. market has been gradually declining as consumers have shifted loyalties to specialty beauty retailers or online purchases. However, the importance of this market for its business despite the negative trends is not lost on Revlon.

Digital Initiatives – Revlon is focusing on digital and e-commerce initiatives by working with 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, in the last quarter 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 in Q2 and beyond from the Elizabeth Arden integration and thus post healthier results in the coming quarters.

 

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