Restructuring plunges Revlon into red

By Simon Pitman

- Last updated on GMT

Related tags: Vital radiance, North america, Revlon

The upstart of Revlon's comprehensive restructuring program has
resulted in the company moving into the red, as a fall in sales,
restructuring and losses associated with the failed Vital Radiance
line take their toll.

The company reported a net loss for the fourth quarter of $5.5m, against a net gain of $64.3m for same period in 2005. Net loss for the full year was $251.3m, against a net loss in 2005 of $83.7m. The figures fall in line with the fact that in September last year the company discontinued the Vital Radiance line - cosmetics aimed at the 40-plus market, appointed a new CEO, David Kennedy, and announced the loss of 250 jobs. "Our results for the year reflect the important and costly decision we have made to position Revlon for future success," said Kennedy. "As we move into 2007, we will continue to concentrate on bringing innovation to the market in a way that is intensely focused on improving our profitability and cash flow." Kennedy added that he expects EBITDA for 2007 to come in at $210m, compared to the $78.2m achieved during 2006. The company said that the losses for the quarter were mainly due to its restructuring program, as well as costs associated with the termination of the Vital Radiance line, which is estimated to have impacted profitability by about $145m during 2006. The company also reported a significant dip in sales, which were down 13.5 per cent for quarter to $379.9m, compared with net sale of $437.8m in 2006 - a figure that was slightly boosted by the favorable impact of currency exchange. Net sales for the full year were $1.331bn, a figure that almost exactly matched the figure for 2005. The company said that higher shipment and lower returns had been offset by higher allowances. Breaking the sales figures down on a geographical basis, the company's poor performance in its mainstay North American market becomes glaring. On a quarterly basis, net sales in the US dropped by 20.7 per cent to $227.1m, on the back of a big drop in the sale of color cosmetics, partly explained by the failure of the Vital Radiance line. Quarterly sales in international markets were largely stagnant at $151.8m, boosted by double digit growth figures in Latin America. On a full-year basis, net sales in North America fell 3 per cent to reach $764.9m, while international sales increased 4.1 per cent to reach $566.5m.

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