Stock Watch: Revlon

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When Revlon Inc. announced that it would miss its revenue growth forecasts for the year, stockholders saw shares of the company plunge nearly 40%, and analysts spared no ink cautioning potential investors…

Revlon’s new Vital Radiance brand and repositioning of Almay—which together cost the company $62 million in 2005—appeared on track to meet sales expectations when first-quarter results were announced, but subsequent data showed that sales for the brands are less than expected. The efforts were Revlon’s “first real growth initiatives in years, but they also seemed to us to be last-ditch efforts,” according to Morningstar analysts, reflecting fundamental problems at Revlon and its ability to successfully execute on the shelves. Further, analysts believes the company has been caught off guard by the aggressiveness of competitors and the shortened timeline retailers allow for new brands to prove themselves…

As Morningstar notes, and a lesson to the industry as a whole, the decline of Revlon demonstrates that a strong brand does not necessarily equate to a strong company.

For the full Stock Watch on Revlon, see the August issue of GCI.

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