Retailer Revolt Causes $40 Million Loss at Revlon

Target, CVS, Others Reject Vital Radiance, Leading to Marketer's Q2 Meltdown

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The product hailed as key to a much-needed makeover at reeling Revlon has been rejected by many Wal-Mart, Target and CVS stores, a slap that delivered a stinging $40 million loss in its second quarter.

Worse, Revlon's outlook is growing even less rosy as its Almay brand struggles despite major media outlays and the new Flair fragrance central to its prestige strategy was snubbed by crucial customer Federated Department Stores. "Revlon is really running out of options," said Reach Marketing managing director Burt Flickinger III, who blamed the retailer revolt on President Jack Stahl's failed down-market strategy.

"Revlon made a big commitment to go mass market with Wal-Mart a few years back and got great support from them for a time while alienating better department stores," Mr. Flickinger said. But Wal-Mart and Target's sophisticated information systems have caused them to back away quickly from brands that aren't working. Moreover, the prestige channel doesn't trust Revlon not to run back to the discount channel if sales for Flair don't fly. "This could be the most challenging crisis the company ever faced," he said.

Certainly Revlon Chief Marketing Officer Stephanie Klein-Peponis and Revlon's major agency, Kaplan Thaler Group, New York, are taking heat for marketing mistakes. Kaplan Thaler didn't return a call for comment.

Vital Radiance, the not-so-vital brand blamed for wreaking havoc on Revlon's bottom line, contributing more than 40% of Revlon's $95 million operating loss for its second quarter and $60 million for the year, aided the marketer in gaining 22% more shelf space based on the promise of strong marketing support, according to an executive close to Revlon. But then the marketing spigot was turned off as soon as signs of trouble emerged.

For the first three months of 2006, Revlon spent only $700,000, according to TNS Media Intelligence, for Vital Radiance, which was launched in January. That outlay paled in comparison to Procter & Gamble's $9 million in the same period for its own Cover Girl Advanced Radiance age-defying foundation, which beat Vital Radiance to the scene last year.

Ms. Klein-Peponis is also on the hot seat for the Flair fragrance delay from this summer to spring 2007. Revlon had slated to run ads featuring model Isabeli Fontana with scent strips in August magazine issues before news of Federated's refusal to carry the brand. A Revlon spokesman said the company does not comment on its relationships with specific vendors, but said "whatever [any single retailer] would do would not preclude us from moving forward" with Flair.

Executives close to Revlon, however, believe it won't succeed without Federated.

Jeffrey Nugent, former Revlon CEO, said, "The problem with marketing to women over 50 in beauty advertising is that they don't want to be reminded they're over 50."

Although Mr. Stahl tried to put the best face on the situation, noting that Vital Radiance has been far more successful in food and drug stores than in "large-format" stores, it's not been a hit at some major drug chains. CVS now carries the line in only 647 of its more than 5,300 stores and Rite-Aid in only 2,400 of its 3,300 stores. A Walgreen's spokesman said Vital Radiance was carried "chain-wide" and that there are no plans to discontinue it.
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