How Will Revlon Perform In Q3 2018 Earnings

Revlon (NYSE: REV) is slated to release its Q3 earning on November 2. The company will be eager to see a breakthrough in its upcoming results following a lukewarm performance over the last few quarters. During the Q2 earnings, where its top line declined to $606.8 million, down 6% y-o-y, primarily driven by net sales declines in the Revlon, Portfolio, and Fragrances segments, with a slight offset by net sales growth within the Elizabeth Arden segment. Revlon has also experienced this decline in net sales due to service level disruptions at the Company’s Oxford, N.C. plant. Revlon operates under four global brand teams reporting its results under four new segments: Revlon, Elizabeth Arden, Portfolio brands, and Fragrances. Of these 4 segments, EA and the Portfolio segment have been profitable for Revlon and are gradually getting stronger contributors in the top line for the Company.

That being said, Revlon has been doing better in its international markets than in the North American market of late, with its international growth primarily being driven by double digit growth in Asia and Latin America. Revlon’s Elizabeth Arden brand has performed well in Q2 driven by new launches and a strong digital presence. Its net sales rose 4.9% to $106.1M, primarily driven by higher net sales of Elizabeth Arden skin care products, including Ceramide and Prevage, principally in international markets. Revlon is on track to attain integration synergies of $190 million by 2020 in restructuring and related charges in connection with implementing actions under the Elizabeth Arden Integration Program in Q2.

With the initiatives adapted by Revlon’s top management for a brand makeover, the company is positive that the new changes will now steer Revlon towards the path of growth in Q3 and beyond. Please refer to our dashboard analysis on What To Expect From Revlon’s Q3 Results.

Below we discuss key focus areas that will likely aid Revlon’s upcoming Q3 earnings:

Elizabeth Arden will continue to perform well – Effective January 1, 2018,  Revlon began to operate under four global brand teams reporting its results under four new segments: Revlon, Elizabeth Arden, Portfolio brands, and Fragrances. Among all its segments, Elizabeth Arden net sales, on the other hand, increased by 4.9% on a y-o-y basis to $106 million compared to the prior-year period. This growth has been driven by an increase in net sales of Elizabeth Arden branded skin care products internationally, in addition to lower cost of sales due to the realization of synergies and cost reductions in the first quarter of 2018, partially offset by higher brand support expenses.

International Markets to boost sales – Revlon’s international business is likely to be one of the main driving factors for its businesses  in the future. The international business is seeing major growth from the Asia Pacific region. On the other hand, the company’s share of revenue from the U.S. market has been gradually declining as consumers have shifted loyalties to specialty beauty retailers or online purchases. However, the importance of this market for its business, despite the negative trends, is not lost on Revlon. The international business, on the other hand is seeing major growth from the Asia Pacific region and will continue to gain in 2018.

Digital / Online Focus – Revlon is getting more aggressive in digital and e-commerce initiatives by setting up a new team of digital professionals realizing the importance of digital progress and social media in a brand’s reach and popularity among its clientele.  Along with increasing ad investments, the company is also shifting most of its campaigns to the digital platform.  Recently, Revlon collaborated with a leading digital consultancy, Sapient Razorfish,  to create a stronger digital presence. These factors are working in its favor as an increasing number of customers are buying beauty products online.

Revlon is expected to reap stronger results in Q3 and beyond from the Elizabeth Arden integration and thus post healthier results in the coming quarters.

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