Revlon enlists outside aid in bid to regain leadership

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As Revlon's president-CEO marks his first year on the job, the company is taking steps to fix its face for 2001.

Revlon has moved to change the complexion of its advertising efforts and in-store displays, narrowed its financial losses and touted a lineup of new products for early 2001. President-CEO Jeffrey Nugent, who assumed the job in November 1999, reassured analysts the company will achieve its long-promised turnaround shortly.

Wall Street wasn't immediately convinced. Revlon's stock closed at $6.37 on Nov. 9, down from $6.50 the day before. The stock's 52-week high is $12, while its low is $5.75.

Essentially conceding that it needs the help of outside resources, the makeup company twice skirted in-house agency Tarlow Advertising, New York, to farm out assignments for its Ultima II brand and the launch of a new cosmetics line. Industry observers expect more assignments will go to outside agencies as Revlon tries to reclaim a leadership position in the cosmetics category.

On Nov. 3, Revlon hired Kirshenbaum Bond & Partners to handle the launch of Skinlights Face Illuminators, a line of skin brightening products due in stores in January. Three days later, it hired Laspata/DeCaro, New York, to handle its Ultima II makeup and skincare brand, previously at Tarlow. Laspata/DeCaro will launch a new ad campaign for Ultima in early 2001.


A Revlon spokeswoman said Tarlow remains the company's agency of record, but acknowledged Revlon will seek other agencies to handle projects. She would not elaborate, and other Revlon officials were not available for comment.

"A little competition between ad agencies is a good thing," said Suzanne Grayson, president of consultancy Grayson Associates. "It's a credit to the new management and the respect that [Chairman Ronald] Perelman has for the management that he said to them, `It's your call.' "

The marketing shake-up was overdue, according to industry observers. The company was criticized sharply over the last two years for not bringing out more innovative products.

Revlon has battled weak financial results since 1998 and has tried several strategies to cut back nearly $1 billion in debt related to its 1985 leveraged buyout by Mr. Perelman. The company began a cost-cutting program in 1998 and explored several asset sales in 1999, as well as a sale of the whole company. When it failed to find a buyer, Revlon announced it would sell its Revlon Professional Products division and several Latin American brands.

Revlon posted improved results for third quarter 2000, although sales were essentially flat from the previous quarter, at $351.9 million. But compared to the third quarter of 1999, when sales were $452.4 million, sales were off 22.2% for the most recent period. The company narrowed its losses to $26.3 million, from $164.7 million for the same period a year ago.

In a conference call with analysts, Chief Financial Officer Doug Graf said Revlon had scaled back its brand support as part of the restructuring efforts. The reduced spending has been a sore point for critics.

Merrill Lynch & Co. analysts project Revlon's total global spending on advertising and marketing will drop 24.8% to $310 million in 2000, from $412 million in 1999; and will drop further to $273 million in 2001, down 11.9% from predicted 2000 levels. Revlon spent $141 million in media in 1999, according to Competitive Media Reporting, but only $39 million in the first half of this year.

Its new Revlon Hair Treatment, a premium haircare line launched in September, will be followed by four new major product lines in the first quarter. Revlon will launch two new cosmetics lines in January, Skinlights Face Illuminators and Vitamin C Absolutes. They will be followed in February by Almay Milk Plus skincare and Healthy Nail, a group of nail treatment products.

Milk Plus is the first major skincare launch in years for the Almay brand, which has seen its share of the $3.4 billion mass cosmetics market remain relatively flat, dropping to 6.5% of dollar sales in the 52 weeks ended Oct. 7, from 6.8% in 1999, according to ACNielsen Corp. figures compiled by J.P. Morgan & Co. (AA, June 19)

The good news was not enough to boost Wall Street's view of Revlon. In a report issued after the quarterly conference, Merrill Lynch analyst Heather Hay Murren noted that in spite of the improving picture, Revlon still has to increase its sales at retail.

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