Revlon Posts Loss in Q4

Could things get any worse at Revlon? In a word, yup. The beauty products maker controlled by financier Ron Perelman, said Tuesday it swung to a fourth-quarter loss as U.S. sales declined and the company incurred restructuring charges and costs to discontinue its line of cosmetics for older women.

Shares dropped more than 5 percent in morning trading.

Revlon lost $5.5 million, or a penny per share, for the three months ended Dec. 31 compared with a profit of $64.3 million, or 17 cents per share, during the same period a year ago.

Revenue fell 14 percent to $378.9 million. The decline was mainly due to lower shipments, partly offset by lower returns, allowances and discounts. Year-ago results were helped by a relaunch of its Almay brand and the launch of Vital Radiance products which has since been discontinued.

U.S. sales fell 21 percent to $227.1 million, while international sales were flat at $151.8 million.

Restructuring charges, costs to discontinue Vital Radiance, its makeup line for older women, and executive severance hurt operating income by $20.8 million during the quarter, Revlon said.

For the year, Revlon’s loss widened to $251.3 million, or 62 cents per share, from a loss of $83.7 million, or 22 cents per share, in 2005. Revenue totaled $1.33 billion, flat from 2005 sales.

Operating income for the year was hurt by restructuring and discontinuing the Vital Radiance line by about $145 million.

The company said it has completed taking charges for discontinuing Vital Radiance, except for a $2 million charge from accelerated amortization related to displays in the first quarter.

David Kennedy, president and chief executive, who abruptly replaced Jack Stahl in September, said the focus for the company going forward will be the core Revlon brand, including two new Revlon product introductions in the eye and face categories in the second half of the year.

“In 2005 and 2006 the focus was clearly off the Revlon brand,” he said during a conference call with analysts. “…Now that Vital Radiance and Almay are behind us, clearly the strategy going forward the focus is on the Revlon brand.”

Mr. Kennedy said the company will focus on color cosmetics and other categories including women’s hair color, beauty tools, fragrance, antiperspirants and deodorants.

The company expects adjusted earnings before interest, taxes, depreciation and amortization will be $210 million in 2007.

Revlon introduced two restructuring programs in 2006, which included a goal of cutting 300 staffers and consolidating facilities. As of Feb. 28, the company had cut 271 staffers, consolidated 100,000 square feet of its New York headquarters by vacating two of four floors, and closed a plant in New Jersey as part of a plan to save $55 million annually.

Revlon said that according to ACNielsen, Revlon brand market share slipped 1.7 percentage points to 13 percent in the quarter, which concerned one analyst.