They say that the rich also cry and that could apply to large multinationals. World-renowned and present in 150 countries, the firm founded in 1932 under the name of Revlon, you could see the end of your days by declaring bankruptcy. Considered one of the most important cosmetics companies in the world during the last decades, last week it declared bankruptcy in the United States.
By filing a petition to voluntarily avail themselves of the protection of the United States Bankruptcy Law, the multinational has the objective of reorganize to deal with the sharp rise in inflation. Although none of the brand’s international operating subsidiaries have been included in this procedure, he has not hesitated to comment that this measure has been taken to strategically reorganize the company’s capital structure.
Receiving court approval to borrow $375 million, Revlon said it will use this fund to bolster chain problems that could ultimately put their sales for the Christmas campaign are in danger.
Robert Caruso, Revlon’s restructuring director, assured that the vast majority of the firm’s raw material suppliers stopped sending shipments and others demanded the payment of past debts or deposits in future deliveries. Lacking access to raw materials, Revlon is unable to meet sales demands.
Today the company can handle 70% of customer orders without delays or cancellations – compared to the industry standard of 90-95%. All this has caused its shares to have lost 80% of its value on the stock market since the beginning of the year.
With losses of 206.9 million dollars, the company’s net result for 2021 has been negative – the 2020 losses were 619 million dollars. Debra Perelman, president and CEO of Revlon, assured that
Despite having experienced strong growth in demand, we have suffered in the supply chain. As of the third quarter, our business has been impacted by inflation in components and ingredients, difficulties in logistics and lack of labor.
In the last quarter of 2021, Revlon posted revenue of $615.2 million, which translates to a 1.8% drop from 2020. But this goes back to before the COVID-19 pandemic: the multinational was struggling with debt in a sector where demand and consumer tastes had changed dramatically and competition was increasing.
Reasons why Revlon has declared bankruptcy
- supply chain problems. As we have already mentioned, the increase in the price of raw materials, energy and the cost of packaging has caused the production of cosmetics to increase in cost between 25 and 30%.
- Too high a debt. As we have already mentioned, the crisis comes from before the Pandemic, since in 2019 its losses were 151.2 million dollars.
- Very strong competition. More and more celebrities are no longer an image for the big firms and take advantage of the pull to launch their own firms. Kylie Jenner, Rihanna, Olivia Palermo or Jennifer López are some of the celebrities who wear it with their own brand.
- The progressive disappearance of shopping malls. In the United States, shopping malls are closing their doors. Consumer preferences have changed and this means that in the last year chains such as Bed Bath & Beyond (where Revlon products are found) announced the closure of 37 stores in 19 states last February.
Modernizing its image after announcing Megan Thee Stallion as a Revlon ambassador in 2020, dedicating a makeup collection to the movie Wonder Woman or launching an avocado nail polish, 2022 could be the brand’s last year.
Although Revlon was the first to file for bankruptcy, this situation could be experienced by many other cosmetics firms. Shortages of ingredients – including paper, glass and other key oils – as well as rising ingredient prices make these problems the same as many other firms.
Photos | Instagram @revlon, @kyliecosmetics