Stiff competition in the beauty industry and the pressure from Revlon Inc (NYSE:REV)’s largest shareholder, Ron Perelman, are the leading factors impacting the possible restructuring of the company. Perelman recently made public his intention to start searching for a strategic alternative for the company. The above factors might not signify sufficient reasons, but struggle in financial growth by Revlon is the main factor towards restructuring. This company experienced a lackluster performance between January and September in 2015 stating currency headwinds as being the major factor in this slowdown.
Revlon has faced stiff competition from both L’Oreal SA (EPA:OR) and, Estee Lauder Companies Inc (NYSE:EL) which are much bigger companies with substantial resources for research and marketing. This gives them the ability to expand into newer geographical areas while also exploring more modern products. L’Oreal recently introduced its first wearable, which can detect ultraviolet rays whenever a user’s skin is exposed. It also spent approximately $1.0 billion in research and development during the year 2014. Estee Lauder on the other hand recently introduced an extensive portfolio of new products.
The competition has been tough, but L’Oreal and Estee Lauder are earning much more in comparison to Revlon. L’Oreal, for instance, had $30 billion in revenues for the year 2014. Estee Lauder, on the other hand, had $10 billion while Revlon only managed around $2 billion.
Revlon has been trying to maintain its identity and stay in the competition. Some of the strategic moves the company has tried include: Revlon acquired Colomer Group in 2013, Revlon exited China and Venezuela after facing loss and unprofitable business respectively, Revlon acquired a fragrance business in the U.K, in 2015 Revlon launched its first new fragrance label know as ‘Love is On’. While these are great strategic moves for the company they fail to to be seen on the bottom line of the balance sheets.
Perelman has been noted to attempt an acquisition of the remaining stake in the company while still undervalued. The price estimate for Revlon’s stock is $34. This is almost a 15% premium to the current market price. Most analysts have stated that if Revlon is given the right leadership and direction, it has a significant potential for future growth. This is what Perelman might be planning to do.