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Explained: Revlon goes bankrupt. What went wrong with the cosmetics giant?

Revlon filed for bankruptcy, citing supply chain challenges and mounting debt. The company said that move will allow it to strategically reorganise its legacy capital structure and improve its long-term outlook.

June 18, 2022 / 02:06 PM IST

Revlon Inc, known for its lipsticks and nail polishes, filed for Chapter 11 bankruptcy protection in the US as it struggles with a huge debt load and supply chain constraints in the wake of the global container shortage.

The bankruptcy protection will enable it to strategically reorganise its legacy capital structure and improve its long-term outlook, especially amid liquidity constraints brought on by continued global challenges, including supply chain disruption and rising inflation, said the cosmetics giant.

Revlon, according to the court filing, has a total debt of $3.7 billion, while its listed assets stand at $2.3 billion. The company said it expects to receive $575 million in debtor-in-possession financing from its existing lender base, which in addition to its existing working capital facility, will provide liquidity to support day-to-day operations.

Here’s a rundown on Revlon’s journey so far, why it is grappling with supply-chain issues, and what went wrong with the company.

How big is Revlon in the US and the world?


Founded in 1932 in New York City, Revlon products are sold in over 150 countries. The company reported net revenue of $2.08 billion in 2021. Besides Revlon, the company also sells skincare and fragrance products under the Elizabeth Arden brand, which is positioned in the premium segment.

Revlon’s business is divided into four major groups—Revlon, Elizabeth Arden, fragrance segment that houses perfume brands like Elizabeth Taylor, Britney Spears, etc., and portfolio segment which includes brands like Crew, Almay, etc. According to a report by the company, Revlon contributed 35 percent of its total revenue in FY21, Elizabeth Arden had a 26 percent share in its turnover during the period, while the fragrance and portfolio segments contributed 19 percent and 20 percent, respectively.

According to data from Euromonitor, Nielsen and Kline, Revlon is among the top three global mass cosmetics brands, while hair colour products under Revlon are highest-selling in the US.

Why did the company file for bankruptcy?

Revlon started by selling nail polishes in 1932 and surged over the years to become a household name in the US and globally. The company was acquired by MacAndrews & Forbes in 1985 and went public in 1996.

Of late, however, the company has been unable to keep up with the rapidly changing cosmetics market as several new players entered the segment. The US company had reported net losses of $206.90 million in FY21, while its total debt as it filed for bankruptcy stood at $3.7 billion. The company sales, too, according to filings with the stock exchanges, fell by 22 percent from $2.69 billion in 2017 to $2.08 billion in 2021.

While Revlon’s debt had been mounting, a challenging operating environment due to inflation added to its woes. Even as the company was grappling with mounting debt, it was hit by global supply chain issues, which further burned its capital as costs climbed up.

The bankruptcy declaration will help the company reorganize its capital structure and revive its fortune.

According to Debra Perelman, Revlon's president and chief executive officer, while the consumer demand for Revlon’s products remains strong, its challenging capital structure has limited the company’s ability to navigate macro-economic issues to meet this demand.

“By addressing these complex legacy debt constraints, we expect to be able to simplify our capital structure and significantly reduce our debt, enabling us to unlock the full potential of our globally recognized brands,” she said.

None of Revlon’s international operating subsidiaries are included in bankruptcy proceedings, except Canada and the U.K.

How supply chain issues contributed to Revlon’s woes?

Consumer goods companies, globally, are struggling with a shortage of key materials, and high inputs and freight costs. While the trigger for the supply chain disruptions was the onset of the Covid-19 pandemic, the Ukraine-Russia war and lockdown in China have worsened the situation.

According to Revlon, supply chain dynamics changed significantly as its vendors’ capacities were constrained due to their own supply chain issues as well as strong demand.

“Given our poor payment performance, vendors became much less tolerant of late payments. As the past dues increased, the vendor’s intolerance amplified the already challenging macro supply chain landscape and severely brought down service levels that were recovering in Q1 of 2022,” said a statement by the company.

“A lockdown in China which began in the first quarter, as well as the continued shortage of key chemicals and components, further aggravated the situation,” it added.

The supply chain troubles were mentioned by the company in its bankruptcy filing too, which said that the vendors who gave it a leeway of 75 days for payment, began asking for advances for new orders in the wake of the shortages.

What’s the way ahead?

The company’s management team will continue to run the business even as it goes through bankruptcy proceedings.

Revlon, the company said, intends to pay vendors and partners under customary terms for goods and services received on or after the filing date to pay its employees in the usual manner, and to continue their primary benefits without disruption. “The company expects to receive court approval for all of these routine requests,” it added.
Devika Singh
first published: Jun 17, 2022 06:15 pm
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