Grey is out as Revlon's global agency of record after a year, the agency confirmed. And in a piece of news dropped by new Revlon CEO Debra Perelman on Thursday's earnings call, it's being replaced by an in-house shop, The Red House.
"Our contract ran through June, and we both chose not to renew," says Grey spokesman Owen Dougherty. The agency continued its work as Revlon got its internal agency up and running, he says.
The move comes after Grey's WPP sibling Mediacom resigned its global assignment in March, replaced in July by Interpublic's Initiative. And it came amid a 6 percent revenue decline for Revlon last quarter, which missed Wall Street's estimates, mainly due to an 11 percent decline in the sales of the flagship brand handled by Grey.
On the conference call, Perelman blamed Revlon's woes primarily on continued production issues that began earlier this year during set up of an SAP enterprise resource planning system, but she also noted that "consumption decline" played a role.
The Revlon brand got $59 million in measured media support in the U.S. last year, according to Kantar Media, but that doesn't include spending on the assignment outside the U.S.
On the earnings call, Perelman said The Red House "will be our internal center of excellence for content creation, as well as drive cost efficiency."
The latter has become more crucial given that Revlon reported a $122.5 million loss last quarter, almost triple the $36.5 million lost in the year-ago quarter. The company has burned through $190.1 million in cash through the first six months of the year, but reported a new $50 million unsecured line of credit from its majority shareholder, MacAndrews & Forbes, controlled by Ronald Perelman, who's also Revlon's chairman and the CEO's father.
That left Revlon with $106.5 million of available cash and other liquidity at quarters end. Responding to analyst questions, Revlon Chief Financial Officer Victoria Dolan said the company has sufficient cash and financing to meet projected cash needs for the next 12 months.
Despite the woes of its flagship brand and a 15 percent decline in fragrance sales last quarter, Revlon had several bright spots, including 5 percent growth of its Elizabeth Arden business; 3 percent growth of other portfolio brands, which includes recently restaged Almay. The company also put the new Flesh prestige brand into an unspecified number of Ulta stores; the lineup includes 40 shades of foundation akin to Rihanna's Fenty Beauty and Coty's recently restaged CoverGirl lineup.
Perelman is the fourth CEO to lead Revlon in the past six years, and the second executive to head the company, including interim chief Paul Meister, since Fabian Garcia—the CEO who appointed Grey and Mediacom to their global roles last summer—left in January.