Revlon, a multinational beauty company that has been there for over 90 years, has filed for Chapter 11 bankruptcy protection due to several reasons like debt load, rising costs, and the disruptions to the supply chain network due to the COVID-19 pandemic. Upon court approval, the company will get $575 million in financing from its existing lenders, enabling it to keep its day-to-day operations running.
Debra Perelman, Revlon's
CEO and President, stated, "Today's filing will allow Revlon to offer our
consumers the iconic products we have delivered for decades while providing a
clearer path for our future growth."
Her father,
billionaire Ron Perelman, backs the company through MacAndrews & Forbes. It
acquired the business through a hostile takeover in the late 1980s. In 1996, Revlon
went public.
The
Challenges
Perelman stated
that though the demand for its products is strong, the "challenging
capital structure" offers limited ability to navigate macro-economic
issues. The brand hasn't done so well when it comes to keeping pace with the
changing beauty trends, especially while tackling other issues like heavy debt
and stiffer competition from celebrities (Kylie Jenner) and non-celebrities
(Procter & Gamble) alike.
The Pandemic
Effect
Revlon's
problems intensified with the start of the pandemic. The sales of lipsticks
were hurt as people wore masks to protect themselves from the virus and the use
of lipsticks reduced considerably. Sales fell to $1.9 billion in 2020, but
sales rose to about 8% in the latest quarter that ended this March as shopped
went back to normal.
Revlon also
experienced higher costs and severe supply chain issues like several other
companies. The logistical issues impacted the company's ability to meet
customer orders. Other challenges included labor shortages and rising prices of
key ingredients.
Losing
Rankings
In the 20th
century, Revlon was the second-largest cosmetics company by sales. Now, it's on
No. 22 as per a recent ranking by the fashion trade journal WWD.
History
In 1932, Charles
Lachman and brothers Charles and Joseph Revson founded Revlon. It was bought in
2016 by Elizabeth Arden. It houses many top brands like Britney Spears
Fragrances and Christina Aguilera Fragrances.
An
International Problem?
Though the
company has filed for bankruptcy protection in the US, the international
operating subsidiaries are not included in the proceedings except in the United
Kingdom and Canada. The bankruptcy filing was in the US Bankruptcy Court for
the Southern District of New York. The filing also says Revlon's listed assets
and liabilities were between $1 billion and $10 billion.
Hope for the
Future
Revlon might use
the time involved in bankruptcy proceedings to improve its portfolio as several
of its brands are still performing well. David Silverman, a senior retail
director at Fitch Ratings, said, "If
executed effectively, Revlon could emerge from bankruptcy with a cleaner
balance sheet and a better operating profile, improving longer-term business
prospects."
PJT Partners is
acting as a financial advisor to Revlon. Also, Alvarez & Marsal is acting
as restructuring advisor.
Sources:
https://www.cbc.ca/news/business/revlon-bankrupt-1.6490664
https://www.cnn.com/2022/06/16/investing/revlon-bankruptcy/index.html
https://www.cnbc.com/2022/06/16/cosmetics-giant-revlon-files-for-chapter-11-bankruptcy-protection.html