Revlon, Inc. released financial results for the quarter ended 31st March, 2021 and announced that it is expanding the existing Revlon 2020 Restructuring Program through 2023.
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The Company will rename the revised program the Revlon Global Growth Accelerator. The expanded program includes a reinvestment strategy to strengthen its brands and drive long-term sustainable margin and revenue growth through realized incremental productivity initiatives and enhanced capabilities.
The major initiatives underlying the Revlon Global Growth Accelerator Program include strategic growth, to boost organic sales growth behind its strategic pillars – brands, markets, and channels — to deliver an approximate mid-single digit Compound Average Annual Growth Rate through 2023; Operating efficiencies, to drive additional operational efficiencies and cost savings to fuel investments in revenue growth. Under RGGA, the Company expects to deliver annualized incremental cost reductions of approximately $75 million – $95 million through 2023 to drive continued improvement in margin; build capabilities, to enhance capabilities and up-skill employees in order to evolve our culture to promote agility and deliver transformational change.
The Revlon Global Growth Accelerator will set the foundation for the Company’s long-term sustainable growth in both margin and revenue. The focus is on its iconic brands of Revlon and Elizabeth Arden in key markets and channels of US Mass, US Prestige, EMEA and China, and our global e-commerce business.
As reported net sales were US$445.0 million in the first quarter of 2021, compared to US$453.0 million during the prior-year period, a decline of US$8.0 million, or 1.8%. The Company experienced double-digit net sales growth in its Elizabeth Arden and Fragrances segments. As reported net sales include approximately US$44 million of estimated negative impacts associated with the ongoing effects of the COVID-19 pandemic.
Penetration of e-commerce net sales increased to approximately 13% of net sales versus 12% of net sales in the prior-year period. E-commerce net sales grew by approximately 5% across all regions, which includes double-digit top-line growth of its mass retail, professional, and prestige franchises in EMEA; its mass retail franchise in Asia; and in its professional and prestige franchises in North America.
As reported operating loss was US$12.7 million in the first quarter of 2021, compared to a loss of US$186.2 million during the prior-year period. The lower operating loss was driven primarily by US$124.3 million in lower impairment charges, US$28.9 million in lower selling, general and administrative expenses (SG&A), driven in part by cost reductions associated with the Company’s restructuring program, and US$19.4 million lower restructuring charges.
Despite continued COVID-19 headwinds, the Company was able to improve its gross margin by 70 basis points. Adjusted operating income in the first quarter of 2021 increased by US$12.6 million to US$1.8 million from a US$10.8 million Adjusted operating loss in the prior-year period, which represents the highest first quarter Adjusted operating income achieved by the Company in five years.
As reported net loss was US$96.0 million in the first quarter of 2021, versus a US$213.9 million net loss in the prior-year period. The lower net loss was driven primarily by improvements in the As Reported operating loss as described above, partially offset by a US$48.4 million higher income tax provision and US$10.5 million higher interest expense. Adjusted net loss was US$83.3 million in the first quarter of 2021, compared to an Adjusted net loss of US$64.7 million during the prior-year period.
Adjusted EBITDA in the first quarter of 2021 was US$38.2 million, versus US$28.4 in the prior-year period, which represents an approximately 240 basis point improvement to Adjusted EBITDA margin over the prior-year period. The higher Adjusted EBITDA was driven primarily by the lower Adjusted operating loss.
As of 31st March, 2021, the Company had total liquidity of US$129.6 million. On 7th May, 2021, the Company closed an amendment to its 2016 asset-based revolving credit agreement with MidCap Funding IV Trust as the collateral agent and administrative agent, as successor in such capacity to Citibank, N.A. The amendment, among other things, extends the scheduled maturity of the revolving credit facility and the second-in, second-out term loan thereunder from 8th June, 2023 to 7th May, 2024, subject to certain springing maturities.
Revlon segment net sales in the first quarter of 2021 were US$162.0 million, a US$19.8 million or 10.9% decrease compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated $23 million during the first quarter of 2021. The segment’s lower net sales were driven primarily by Revlon color cosmetics across all markets, lower North American net sales of Revlon ColorSilk hair care, as well as other Revlon-branded hair care, due primarily to the ongoing effects of the COVID-19 pandemic as well temporary severe weather-related disruptions in the mass retail channel. This decrease was partially offset by higher net sales of Revlon-branded beauty tools and Revlon Professional products.
Revlon segment profit in the first quarter of 2021 was US$8.0 million, compared to US$15.6 million in the prior-year period, a decrease driven primarily by the segment’s lower net sales.
Elizabeth Arden segment net sales in the first quarter of 2021 were US$112.2 million, a US$17.0 million or 17.9% increase compared to the prior-year period. The higher net sales were driven by the Ceramide and Cica Glow skincare products, as well as the Green Tea fragrance collection in North America and Asia. This growth was partially offset by lower net sales of other skin care products. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$3 million during the first quarter of 2021.
Elizabeth Arden segment profit in the first quarter of 2021 was US$9.2 million, compared to US$4.2 million in the prior-year period, an increase primarily due to the segment’s higher net sales, partially offset by higher brand support expenses to support the increased level of sales.
Portfolio segment net sales in the first quarter of 2021 were US$96.0 million, a US$14.0 million, or 12.7% decrease compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$14 million during the first quarter of 2021. The decrease in segment net sales was driven primarily by the sale of the Natural Honey brand in December 2019, which continued to produce transition services revenue during 2020 and lower net sales of Mitchum anti-perspirant deodorants and Almay color cosmetics, primarily in North America and EMEA, due, in part, to the continuing effects of COVID-19.
Portfolio segment profit in the first quarter of 2021 was US$13.1 million, compared to US$7.2 million in the prior-year period, driven by lower SG&A expenses, driven by cost reductions achieved through the Revlon 2020 Restructuring Program, and brand support expenses as well as higher gross profit margin, partially offset by the segment’s lower net sales.
Fragrances segment net sales in the first quarter of 2021 were US$74.8 million, an US$8.8 million, or 13.3% increase compared to the prior-year period. The segment’s higher net sales were driven primarily by Juicy Couture, Curve and John Varvatos in North America, partially offset by lower sales of distributed fragrances in North America and EMEA. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated $5 million during the first quarter of 2021.
Fragrances segment profit in the first quarter of 2021 was US$7.9 million, compared to US$1.4 million in the prior-year period, primarily as a result of higher net sales and lower brand support expenses, partially offset by the segment’s slightly lower gross profit margin.
In North America, Revlon segment net sales of US$83.0 million in the first quarter of 2021 decreased by US$16.1 million, or 16.2%, compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$15 million during the first quarter of 2021. The segment’s lower net sales in North America were primarily driven by lower net sales of Revlon color cosmetics, Revlon ColorSilk hair care products, and other Revlon-branded hair care products, due to the continuing effects of COVID-19 on the mass retail channel, partially offset by higher net sales of Revlon-branded beauty tools.
In International, Revlon segment net sales of US$79.0 million in the first quarter of 2021 decreased by US$3.7 million, or 4.5%, compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$8 million during the first quarter of 2021. The segment’s lower International net sales were driven primarily by lower net sales of Revlon color cosmetics, partially offset by higher net sales of Revlon ColorSilk hair care products and Revlon-branded professional hair care products.
In North America, Elizabeth Arden segment net sales of US$28.4 million in the first quarter of 2021 increased by US$7.0 million, or 32.7%, compared to the prior-year period. The improved North America net sales were driven by the segment’s higher net sales of the Ceramide skin care products, partially offset by Visible Difference skin care products, due primarily to the continuing effects of COVID-19 on foot traffic at department stores and in other retail outlets. The ongoing COVID-19 pandemic negatively impacted net sales by an estimated US$1 million during the first quarter of 2021.
In International, Elizabeth Arden segment net sales of US$83.8 million in the first quarter of 2021 increased by US$10.0 million, or 13.6%, compared to the prior-year period. The segment’s higher international net sales were driven by higher net sales of the Ceramide and Cica Glow skincare products, as well as the Green Tea fragrance collection, partially offset by lower net sales of other skin care products. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$2 million during the first quarter of 2021.
In North America, Portfolio segment net sales of US$63.5 million in the first quarter of 2021 decreased by US$7.3 million, or 10.3%, compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$8 million during the first quarter of 2021. The segment’s lower North America net sales were driven by Mitchum anti-perspirant deodorants and certain regional and local brands.
In International, Portfolio segment net sales of US$32.5 million in the first quarter of 2021 decreased by US$6.7 million, or 17.1%, compared to the prior-year period. The ongoing effects of the COVID-19 pandemic negatively impacted net sales by an estimated US$6 million during the first quarter of 2021. The segment’s lower International net sales were driven primarily by the sale of the Natural Honey brand in December 2019, which continued to produce transition services revenue during 2020.
In North America, Fragrances segment net sales of US$51.3 million in the first quarter of 2021 increased by US$9.1 million, or 21.6%, compared to the prior-year period. The segment’s higher net sales in North America compared to the prior year period were driven primarily by Juicy Couture, Curve and John Varvatos. The effects of the ongoing COVID-19 pandemic negatively impacted net sales by an estimated US$3 million during the first quarter of 2021.
In International, Fragrances segment net sales of US$23.5 million in the first quarter of 2021 decreased by US$0.3 million, or 1.3%, comparable to the prior-year period. The effects of the ongoing COVID-19 pandemic negatively impacted net sales by an estimated US$1 million during the first quarter of 2021.
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“I am pleased with the continued sequential improvement in our business as we continue to recover from COVID-19 while benefiting from the exhaustive restructuring strategies we first implemented in 2018. Our businesses in the prestige channel, including Elizabeth Arden and Fragrances, experienced double-digit net sales growth in the first quarter, recovering more quickly than our businesses in the mass channel related to color cosmetics. As markets around the world continue to reopen and COVID-19 restrictions loosen, we are optimistic around the rebound of the mass channel, and particularly the Color Cosmetics category. Our e-commerce channel continues to experience growth and to increase as a percentage of our net sales, and our Adjusted EBITDA margin grew 240 basis points,” said Debra Perelman, Revlon’s President and Chief Executive Officer.
“Additionally, our Revlon Global Growth Accelerator Program, which we officially announced externally today, is a holistic transformation program that is designed to set the foundation for long-term, sustainable margin and revenue growth. This will enable the Company to maximize the potential of our iconic brand portfolio with a focus on Revlon and Elizabeth Arden in key markets as well as continue to expand our digital and e-commerce capabilities. We continue to anticipate a recovery in demand for beauty products including color cosmetics as the pandemic restrictions ease globally and believe that with the focus of RGGA, we are well positioned to capture the opportunities ahead for Revlon. This truly marks a turning point in Revlon’s trajectory, as we engage the entire organization towards our future: I look forward to Revlon building on the timeless legacy of our iconic brands and once again leading in the dynamic beauty industry,” continued Perelman.