Revlon Inc. (REV:US), the maker of cosmetics under its namesake and Almay brands, will cease operations in China and eliminate about 1,100 positions, including 940 beauty advisers, as it restructures its struggling business.
China makes up about 2 percent of Revlon’s net sales, and the restructuring will result in about $22 million of pretax charges, the New York-based company said in a filing with the U.S. Securities and Exchange Commission. The changes are expected to reduce costs by about $11 million a year, Revlon said.
The company, which posted profit declines in 2011 and 2012, has been making acquisitions (REV:US) and introducing new products as sales in some of its larger brands slow. Earlier last year it bought Colomer Group, giving it Creative Nail professional and Shellac nail polishes, as well as American Crew men’s hair-care products.
“Revlon was unable to gain scale and relevance in the important Chinese beauty market,” Connie Maneaty, an analyst at BMO Capital Markets in New York, wrote in a note yesterday. She rates the shares market perform, the equivalent of a hold.
Colomer Chief Executive Officer Lorenzo Delpani took over as Revlon’s CEO in November, replacing interim chief David Kennedy. The reorganization isn’t related to the acquisition, Revlon said.
The addition of Colomer helps Revlon expand sales in the more-profitable salon sector, an aim shared by competitors such as Procter & Gamble Co. and Unilever.
Revlon rose 1.6 percent to $24.96 at the close in New York yesterday. The shares (REV:US) gained 72 percent in 2013, while the Standard & Poor’s 500 Index advanced 30 percent.
China, where skin-care products are in particular demand, is an important yet challenging market for many Western beauty companies. In its third-quarter sales release on Oct. 30, L’Oreal SA called China’s market “slowing, although still dynamic” and said sales in the quarter grew 11 percent there. P&G said in May it’s been losing market-share in skin and oral care in China. Avon Products Inc. said in October that possible fines related to foreign bribery probes in China and elsewhere may materially hurt profit.
In 2012, 44 percent of Revlon’s revenue came from outside the U.S.
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