Why did Revlon file for bankruptcy? See the details

It may be the end of an era for legendary cosmetics brand Revlon.

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The iconic beauty, who is nearly a century old, officially filed for Chapter 11 bankruptcy on Thursday, citing ‘macro-economic issues’ as the main reason, particularly ‘legacy debt’ challenges and disruptions to the supply chain.

Revlon is expected to receive $575 million in DIP funding to help day-to-day operations and maintain the status quo.

“Today’s filing will allow Revlon to bring our consumers the iconic products we’ve offered for decades, while providing a clearer path for our future growth,” said the president and CEO of Revlon. Revlon, Debra Perelman, in a company statement. “Consumer demand for our products remains strong – people love our brands and we continue to have a healthy market position.”

Although Revlon posted strong results in the first quarter of 2022, the damage caused by the pandemic and its subsequent problems were too great for the former cosmetics company to be mitigated.

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The company’s most recent earnings report showed its highest first-quarter operating profit since 2016, generating $479.6 million in net sales, a 7.8% year-over-year increase. ‘other.

But Perelman admitted that “supply chain challenges continue to impact” the business, noting Revlon’s strategy to double down on “core” brands and an aggressive digital strategy. Yet the company still posted a net loss of $67 million in the first quarter.

Revlon was bought in 2016 by former rival skincare and cosmetics brand Elizabeth Arden in an $870 million deal. The acquisition kept Revlon as both a forward-facing parent brand and on the NYSE as a ticker symbol.

“We expect to benefit from greater scale, an expanded global footprint and a significant presence across all major beauty categories and channels,” the company said at the time. “As a combined organization with net sales of approximately $3 billion, this acquisition will help further accelerate our growth trajectory, position us among the top players in beauty, and unlock far greater benefits than this. that either company would have achieved on a stand-alone basis.”

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The Revlon, Inc. portfolio oversees several legacy and newly created brands, namely Revlon and Elizabeth Arden as incumbent brands, as well as Almay, Cutex and a number of celebrity fragrances including Britney Spears and Juicy Couture.

The 90-year-old company is facing challenges with the rise of celebrity- and influencer-owned makeup brands and collaborations, many of which have seen huge success.

Kylie Jenner’s eponymous brand, Kylie Cosmetics, for example, was sold to beauty giant Coty, Inc. in early 2020 for an estimated $600 million. Coty also oversees popular drugstore brands (and Revlon rivals) Rimmel London and Sally Hansen.

Rihanna’s popular beauty line, Fenty Beauty, operates under luxury fashion and lifestyle house LVMH, whose beauty product portfolio includes fan-favorite KVD and Benefit Cosmetics beauty products.

Although the exact valuation of Fenty Beauty has not been disclosed, Forbes pointed out that the beauty line was responsible for the bulk of the revenue that led to Rihanna’s newly declared billionaire status.

These purchases and partnerships have paid off: Coty recorded a 22% increase in net sales in the first quarter of this year, while LVMH recorded a 29% increase. Revlon did not acquire many brands.

As of early Thursday afternoon, Revlon Inc. was down a sharp 84.5% year-over-year.

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