Strong dollar and weaker sales hit profits at Revlon
The company said that sales for the fourth quarter, which includes the all-important holiday season, fell by 10.4 percent to $334.2m, down from $373.3m.
These figures came despite a considered effort to increase the company’s marketing and advertising activities during the quarter, which in turn pushed up costs.
Currency hits international sales
During the quarter, net sales in the US fell by 7.5 percent to $199.6m, whereas international sales fell by 14.5 percent to $143.6 – a result that was squarely blamed on the negative effect of currency translations.
For the full year, the sales result was a less dramatic loss, falling 1.4 percent, from $1.36bn in 2007 to $1.34bn – a figure that reflected the stronger economic conditions that prevailed in the first half of the year.
Weakened sales and a stronger dollar led to a fall of 72 percent in the fourth quarter profit, down from $40.8m in the corresponding quarter for 2007, to $11.3m.
Full year results make better comparison
However, looking at the yearly figures, presented a healthier picture. In 2007 a net loss of $16.1m was recorded, reflecting significant restructuring costs, compared to a net profit of $57.9m for 2008.
The company said that despite a good performance in its flagship color cosmetics division, this failed to offset a poor performance from its Almay brand as well as other key beauty care products.
Despite the results, Revlon CEO David Kennedy said he thought the company was well placed to weather the current global downturn in view of improved operating margins and reduced debt.
Well placed, despite uncertainties
“We are encouraged by the continued growth in mass channel color cosmetic consumption in the US and in key markets around the world throughout 2008, despite the uncertain economic conditions,” he said.
Despite the increased marketing and advertising budget in the fourth quarter not getting the desired results, Kennedy went on to say that brand communication, advertising and promotion would play an important part in key growth areas of the business in the future.
Although no firm forecasts for 2009 were given, Kennedy said that the current strategy and focus ‘will generate profitable net sales growth and sustainable positive free cash flow’.
