Cosmetics company Revlon, has filed for Chapter 11 bankruptcy protection – weighed down by rising debts, global supply chain disruptions and new rivals. The firm has been a fixture on beauty shelves for 90 years but has struggled in recent years with mounting debt, rising competition and failure to keep pace with changing beauty standards.
The firm said that upon court approval, it expects to receive 575 million US dollars (£467 million) in financing from its existing lenders, which will allow it to keep its day-to-day operations running. The company avoided bankruptcy in late 2020 by persuading enough bondholders to extend its maturing debt.
Debra Perelman, who was named Revlon president and CEO in 2018, said: “Today’s filing will allow Revlon to offer our consumers the iconic products we have delivered for decades, while providing a clearer path for our future growth.” She said demand for its products remain strong, but its “challenging capital structure” offered limited ability to navigate macro-economic issues.
Her father, billionaire Ron Perelman, backs the company through MacAndrews & Forbes, which acquired the business through a hostile takeover in the late 1980s. Revlon went public in 1996.
In recent months, Revlon has experienced industry-wide supply chain challenges and higher costs that are challenging companies worldwide. It said in March that logistical issues hurt its ability to meet customer orders and it was stymied by rising prices on key ingredients and persistent labour shortages.
None of Revlon’s international operating subsidiaries are included in the proceedings except for Canada and the United Kingdom. The filing was made in the US Bankruptcy Court for the Southern District of New York.
The company listed assets and liabilities between one billion US dollars (£810 million) and 10 billion US dollars (£8.1 billion), according to its bankruptcy filing.
Chapter 11 bankruptcy protection offers a company a way to reshape the business by reorganising debt and assets, including real estate. The firm usually continues to do business, with Chapter 11 effectively giving it a fresh start after restructuring its debt and other legal obligations.
Why Revlon is struggling – and hope for the future
Revlon owns household names including Almay and Elizabeth Arden. The company has also broken race barriers and put supermodels like Iman, Claudia Schiffer, Cindy Crawford and Christy Turlington front and centre.
In 1970, Revlon became the first beauty company to feature a black model, Naomi Sims, in its advertising. In the 1980s, it made a big splash with its supermodel campaign featuring diverse, famous and new models including Iman, Claudia Schiffer, Cindy Crawford and Christy Turlington when it promised to make women “unforgettable”.
However the New York company was slow to follow most women who gave up flashy cosmetics like red lipstick for more muted tones starting in the 1990s. In addition to rivals like Procter & Gamble, it faced increased competition from celebrity cosmetics lines like Kylie Jenner’s Kylie, which capitalised on their massive social media following.
Revlon’s problems only intensified with the pandemic as sales of lipstick tumbled, with masks the fashion of the era. Sales tumbled 21% 2020, the start of the pandemic, though those sales bounced back 9.2% in its most recent reporting year with vaccines now widespread.
During its heyday in the 20th century, Revlon trailed only Avon in sales. It now holds the 22nd spot among cosmetics makers, according to a recent ranking by fashion trade journal WWD.
As women venture out after the pandemic, Revlon’s make-up sales are rebounding, according to Ms Perelman. She said the company also used the health crisis as an opportunity to double-down on investments online. During the pandemic, Elizabeth Arden launched one-on-one virtual consultations.
Ms Perelman also said that the company was learning from celebrity launches like Kylie to be more nimble and had cut months off of developing new products. She said she was also seeing Revlon regaining market share. In the latest quarter that ended in March, sales rose nearly 8%.