Revlon (NYSE:REV) makes color cosmetics, fragrances, and anti-perspirants. The company sells its products to consumers through drug stores and mass market retailers such as Wal-Mart Stores (WMT). Sales to Wal-Mart accounts for 23% of the company's total sales. The company earned $1.3 billion in sales and $950K in net income in 2009.
Revlon's color cosmetics market share has been dropping since 1998, and the company has had only a single profitable quarter in the last 8 years. The company's profitability began to suffer in the late 90s when overall industry growth in color cosmetics sales to mass retailers began to decline and increasing competition and drugstore consolidation resulted in reduced shelf space for Revlon's products. Since then, Revlon has struggled to keep up with major competitors as its slowing sales and large debt burden have constricted its ability to spend on either R&D or an effective turnaround strategy.
Revlon competes with several larger competitors that are able to invest much larger amounts in research and development. Over the last decade, Revelon's history of losses have left it with insufficient cash flow to invest sufficiently in R&D. In 2009, the company spent $23.9 million, or 1.8% of net sales on R&D.
Revlon's principal customers include large mass volume retailers and chain drug stores, including retailers like Wal-Mart Stores (WMT), Target (TGT), Sears Holdings (SHLD), Walgreen Company (WAG), Rite Aid (RAD), CVS (CVS), and Longs Drug Stores (LDG) in the U.S., Shoppers DrugMart in Canada, A.S. Watson & Co. retail chains in Asia Pacific and Europe, and Boots in the United Kingdom. Wal-Mart accounts for approximately 34% of Revlon’s worldwide sales. In addition, WalMart's mass purchases give it significant negotiating power with regards to shelf placement, shelf space, and purchase price.
Revlon's primary competitors are Procter & Gamble Company (PG), L'oreal (LRLCY), Avon Products (AVP), and Estee Lauder Companies (EL). Revlon is smaller than both L'oreal and PG in terms of revenues and resources. However, Revlon has a more focused product offering than these companies and when one considers only color cosmetics sales they are much more comparable. Revlon is the second largest color cosmetics company in the US. Competitors Estee Lauder and Avon get the majority of their revenue outside the US.