Revlon Posts Loss in Third Quarter

Cosmetics company Revlon Inc. today reported a $22.1 million third-quarter loss, as the results were hurt by unfavorable foreign exchange, higher marketing costs and a weak U.S. economy that cut into sales of fragrances and deodorant. The company also warned that it may not meet one of the financial benchmarks in the fourth quarter required in its covenant with its creditors.

The maker of Revlon, Almay and Ultima cosmetics posted a net loss of $22.1 million, or 42 cents a share in the quarter, compared with a loss of $22.9 million, or 44 cents a share, a year ago. Sales rose to $323.2 million from $320.2 million a year ago, boosted by licensing fees. But Revlon’s loss from continuing operations widened to $17.9 million, or 34 cents per share, in the third quarter from $2.2 million, or 4 cents, a year earlier. Results from continuing operations exclude restructuring items in both periods.

Revlon has suffered from a heavy debt load and tough competition from Procter & Gamble Co., which owns the Cover Girl and Max Factor brands, and France’s L’Oreal, which owns Maybelline.The company has been spending more money on advertising and marketing, especially in its Revlon brand, and officials said consumers are buying more Revlon color cosmetics, even as Almay consumption fell.

“Given the improvement in consumption we have seen as a result of more and better marketing support in the third quarter, we will increase brand support materially versus a year ago in the fourth quarter,” Douglas Greeff, chief financial officer, said during a conference call with reporters. Mr. Greeff also said the uncertain U.S. retail environment and continued economic weakness in Latin America could cause it to fall below the level of earnings before interest, taxes, depreciation and amortization (EBITDA) required in a covenant with its lenders.

But Mr. Greeff said Revlon is “very confident” it will be able to “work through that circumstance with our lenders” if the EBITDA level falls short of the $210 million required in the quarter.

The company is also “highly confident” it can access liquidity needed to run its business, he said.