Revlon sales up, but profits hit by tax costs

By Simon Pitman

- Last updated on GMT

Related tags Tax United states dollar

Revlon has reported a healthy growth in sales for its third quarter on the back of a particularly strong performance in the US market, but net profits are hit by a substantial tax bill.

The company reported sales up 5.7 percent to $337.2m, a figure that was positively impacted by a weak dollar against foreign currencies. Favorable foreign currency fluctuations accounted for an extra $6.8m in sales, which meant that constant US dollar sales grew by 3.7 percent.

The increase was primarily attributed to growth in sales for its Sinful Colors range, together with higher sales of Revlon color cosmetics and Revlon ColorSilk hair color.

Weak dollar boosts sales

Net sales in the first nine months of 2011 increased 7.3 percent to $1.02bn, while favorable foreign currency fluctuations of $23.5 million meant that net sales increased 4.8 percent in constant currency terms.

Net income took a significant tumble, registering just $0.1m, compared to $12.5m in the corresponding period last year. The figure was impacted by a $22.1m income tax charge, which compared to a benefit from income taxes of $0.6m in the corresponding quarter last year.

“In the third quarter, we continued to execute our strategy as we grew net sales by 3.6%, maintained competitive operating income margins, and generated positive free cash flow,” ​said Revlon CEO Alan Ennis.

“From a marketplace perspective, our continued emphasis on innovation, effective brand communication and strong in-store execution positively impacted our performance,”​ he added.

Outlook is cautious

The company remains cautious about its outlook, with Ennis making a specific reference to the fact that continued uncertainty in the global economic environment means the company is having to manage its financial resources ‘carefully’.

However, the company’s performance in the US market bucked the trend in what has proven to be an extremely challenging market for most cosmetic players of late. Its sales in the US increased 10.8 percent to $184.7m, again driven by the Sinful and Revlon color cosmetic ranges.

The market trend was also reversed in the normally fast growing Latin America market, where sales fell by 12.6 percent to $25.6m, a performance that was largely impacted by unfavourable currency translations and lower net sales in Venezuela.

In Asia Pacific sales increased by 6.4 percent to $58.0m – a figure that was positively impacted by foreign currency fluctuations, while net sales in Europe and the AME region remained unchanged at $51.1m, but decreased by 2.4 percent on account of currency fluctuations.

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