Cosmetics company Revlon has filed for Chapter 11 bankruptcy – weighed down by rising debts, global supply chain disruptions and new rivals. The company has been in the beauty business for 90 years, but has struggled in recent years with mounting debt, growing competition and a failure to keep pace with changing beauty standards.
The company said that following court approval, it expects to receive US$575m (£467m) in funding from its existing lenders, which will allow it to continue operations daily. The company avoided bankruptcy at the end of 2020 by persuading enough bondholders to extend its maturing debt.
Debra Perelman, who was named President and Chief Executive Officer of Revlon in 2018, said, “Today’s filing will allow Revlon to bring our consumers the iconic products we have offered for decades, while providing a clearer path for our future growth. products remain strong, but its “challenging capital structure” provided limited ability to navigate macro issues.
His father, billionaire Ron Perelman, backs the company through MacAndrews & Forbes, which acquired the company through a hostile takeover in the late 1980s. Revlon went public in 1996 .
Over the past few months, Revlon has experienced industry-wide supply chain challenges and higher costs that are challenging businesses around the world. It said in March that logistical problems were affecting its ability to meet customer orders and that it was being held back by rising prices for key ingredients and continued labor shortages.
None of Revlon’s international operating subsidiaries are included in the proceedings, with the exception of Canada and the United Kingdom. The filing was made in the United States Bankruptcy Court for the Southern District of New York.
The company has listed assets and liabilities between US$1bn (£810m) and US$10bn (£8.1bn), according to its bankruptcy filing.
Chapter 11 bankruptcy protection offers a company a way to reshape the business by reorganizing debt and assets, including real estate. The company generally continues to do business, with Chapter 11 effectively giving it a fresh start after restructuring its debt and other legal obligations.
Why Revlon is in trouble – and hopes for the future
Revlon has some household names, including Almay and Elizabeth Arden. The company also broke down racial barriers and brought models like Iman, Claudia Schiffer, Cindy Crawford and Christy Turlington to the fore.
In 1970, Revlon became the first beauty company to feature a black model, Naomi Sims, in its advertising. In the 1980s, she caused a stir with her modeling campaign featuring diverse, famous and new models, including Iman, Claudia Schiffer, Cindy Crawford and Christy Turlington, when she promised to make women “unforgettable”.
However, the New York company was slow to catch up with most women who ditched flashy cosmetics like red lipstick for more subdued tones from the 1990s onwards. In addition to rivals like Procter & Gamble, it faced increased competition from celebrity cosmetic lines like Kylie Jenner’s Kylie, which capitalized on their huge social media following.
Revlon’s problems only intensified with the pandemic as lipstick sales plummeted, with face masks all the rage at the time. Sales fell 21% in 2020 at the start of the pandemic, although those sales rebounded 9.2% in its last reporting year as vaccines became widespread.
At its height in the 20th century, Revlon trailed only Avon in terms of sales. It now ranks 22nd among cosmetics manufacturers, according to a recent ranking by fashion magazine WWD.
As women venture out after the pandemic, Revlon’s makeup sales are rebounding, according to Ms. Perelman. She said the company has also used the health crisis as an opportunity to double down on its online investments. During the pandemic, Elizabeth Arden has launched individual virtual consultations.
Ms Perelman also said the company was learning from celebrity launches like Kylie to be more nimble and had cut months of new product development. She said she also sees Revlon regaining market share. In the last quarter that ended in March, sales increased by almost 8%.