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Time for a mass-market makeover?

Revlon shares are down about 5 per cent on Friday after it reported slipping sales in the crucial North American consumer market.

The beauty giant said consumer net sales in North America fell 9 per cent year-on-year during the three-month to end of December 31 as shoppers increasingly turn to specialty stores and online retailers for their make-up and hair colour fixes.

The decline in the all-important segment dragged overall group sales down 4.5 per cent to $800.7m on a pro forma basis for the quarter. The company also fell into a net loss of $36.5m, or 70 cents per diluted share after it took a $23.4m writedown on its 2015 acquisition of UK fragrance management company and a $34.5m restructuring charge related to the integration of Elizabeth Arden, which it bought last year.

During a call with investors, Revlon chief executive Fabian Garcia blamed the accelerating pace at which shoppers are abandoning the mass-market channels where Revlon and affiliated brands have long been fixtures — like drug stores and chain retailers — for specialty stores like Sephora or Ulta and online channels for its disappointing fourth-quarter performance.

Unlike mass-market channels, which have limited shelf-space for beauty items, those rivals boast a huge array of competing products across a range of price points.

In response, Revlon executives said during the call, the company has been meeting with its mass-market trade partners to share ideas on how to bring those customers back to those stores, including compelling offerings, a more attractive in-store experience and better digital marketing efforts. Executives said they were “encouraged by the feedback” they received on those plans.

But Revlon executives added that while reinvigorating mass-market channel sales are a top priority, it’s not about to put all its lipsticks in one basket. The company is also looking to expand access to its products “whenever and however consumers shop for beauty”, including at specialty stores and online, and recently partnered with online mega-retailer Amazon to stamp its name on millions of shipping boxes. It has also enlisted the likes of Lady Gaga to help boost its brand among millennial shoppers.

Revlon shares are down 9.6 per cent over the past 12 months. The company said Friday it expects some of the trends that dampened its results for the past quarter to persist over the next few months, it is hopeful it will start to regain ground as its plans to boost mass-market channels take hold.

Copyright The Financial Times Limited 2017. All rights reserved.
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