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Revlon CEO steps down as losses mount at cosmetics company
[NEW YORK] Revlon Inc. Chief Executive Officer Fabian Garcia stepped down from the cosmetics maker, bring fresh upheaval to a company struggling with red ink and heavy debt.
Mr Garcia, who is leaving to pursue "other opportunities," will hand the reins to board member Paul Meister, the company said on Monday. Mr Meister will become executive vice chairman and oversee day-to-day operations on an interim basis, with Mr Garcia helping assist with the transition through February.
The shake-up marks less than two years in the job for Mr Garcia, a Colgate-Palmolive Co. veteran who laid out plans to reach US$5 billion in annual sales within five years. (Revenue is currently less than US$3 billion.) The executive, now 58, received a US$2 million cash sign-on award when he joined the company in April 2016.
Revlon has been working to stay relevant in an era when specialty beauty stores and e-commerce shops are shaking up the makeup industry. It's also been digesting the acquisition of Elizabeth Arden, which the company bought for about $419 million in 2016. Those twin challenges have brought "a difficult year for us," Ron Perelman, Revlon's chairman and largest investor, said in a statement.
"We are aggressively catching up to that rapid transformation and I want to thank Fabian for his leadership through this challenging and dynamic period," he said.
The company reported that its fourth-quarter net loss widened to as much as US$80 million, from US$36.5 million a year earlier.
Sales slipped to US$785 million during the period, compared with US$801 million the prior year. Still, that figure was better than the US$743 million predicted by analysts. The shares gained 2.7 per cent to US$22.60 in extended trading after the announcement.
Adjusted earnings before interest, taxes, depreciation and amortisation amounted to US$110 million to US$115 million in the fourth quarter. Analysts were estimating a number at the high end of that range.
For the full year, Revlon expects a net loss of about US$165 million to US$185 million. That includes a roughly US$11 million writedown tied to the company's Global Color Brands division.
Revlon's mounting losses - coupled with its US$3 billion of junk-rated debt - have fuelled speculation that Mr Perelman will seek some kind of deal or asset transfer. The billionaire's investment firm, MacAndrews & Forbes Holdings, owns more than 80 per cent of the company.
J. Crew Move?
Some investors and researchers have raised the notion of Revlon doing a J. Crew-style debt makeover. That company transferred assets to an offshore subsidiary, leaving less collateral for lenders to claim in a potential restructuring.
Revlon Chief Financial Officer Chris Peterson sought to tamp down those concerns on Monday. "A material asset transfer is not being considered," he said in the statement.
Despite Revlon's challenges, the company sees reason for hope. Its color cosmetics business, a category that includes lipstick, foundation and blush, has returned to growth in North America, Mr Peterson said.
The company faces a US beauty industry undergoing several shifts. Shoppers are migrating to specialty stores such as Ulta Beauty Inc and LVMH's Sephora shops, or buying their makeup and cosmetics online. Amazon.com Inc has established itself as a major player in online beauty, while such startups as Birchbox and Ipsy gain ground with their subscription services.
Unlike rivals Estee Lauder Cos. and L'Oreal SA, Revlon hasn't acquired up-and-coming independent beauty brands in order to court younger shoppers, choosing instead to focus its resources on revitalizing existing labels. The company has enlisted plenty of star power to back its brands, including actresses Gal Gadot for Revlon, Reese Witherspoon for Elizabeth Arden, and Rashida Jones for Almay.
Revlon, based in New York, expects to report its official fourth-quarter results on March 2.