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Revlon faces weak results
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October 2, 1998: 7:59 p.m. ET
Cosmetics maker sets restructuring, says 1998 will lag analyst expectations
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NEW YORK (CNNfn) - Blaming everything from reduced retail inventories to a weakened global economy, Revlon Inc. Friday unveiled a restructuring plan and said it expects 1998 earnings to fall below expectations, provoking a plummet in company stock and at least one analyst downgrade.
The cosmetics company said it expects to post third-quarter earnings from continuing operations of about 7 cents per diluted share, not including a 15 cent gain on the sale of a small non-core business. Net sales for the quarter are expected to be approximately $540 million on operating income of about $45 million, including the non-recurring gain.
In the year-ago quarter, Revlon posted net income of 65 cents a share.
For the fourth quarter, the company said operating income is projected to be in the range of $43 million to $46 million and earnings from continuing operations are expected to be about 10 cents to 15 cents per diluted share. The estimates don't include a $50 million restructuring charge.
PaineWebber cut its rating on Revlon to "unattractive" from "attractive."
Shares of Revlon (REV) were punished, shedding 45 percent of their value to close down 12-3/8 at 15-7/16 on the New York Stock Exchange.
"While the anticipated results for the second half of the year are very disappointing, the longer-term outlook for our company continues to be extremely positive, despite significant challenges in the marketplace," said Revlon President and Chief Executive George Fellows. "The business fundamentals of our company are strong."
Under its restructuring plan, Revlon said it will close three international plants, reorganize its workforce principally outside the U.S., and take other cost cutting actions. The company, which did not disclose details of potential layoffs, estimates its will realize "annual benefits" of up to $30 million.
Revlon is suffering from a slowdown in demand for mass market color cosmetics and delays in some product introductions. At the same time, the company said chain drugstores and other retailers are reducing their inventory levels as they consolidate.
"Another factor impacting performance is the aggregate effect of the weak international economic environment, which has hurt consumer and trade demand outside the U.S., particularly in South America and the Far East as well as Russia and other developing economies," Fellows said. "The weakness in foreign currencies against the dollar has also hurt our results." 
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Revlon
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