Revlon's U.S. Sales Support $17 Fair Value

| About: Revlon, Inc. (REV)
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After a sales decline in Q1, Revlon (NYSE:REV) improved its performance last quarter with 1.7% growth in revenue. In particular, the U.S. market, that accounts for half of Revlon's sales, grew at 4.6%. The results were mainly supported by improved sales of Revlon color cosmetics in the U.S., that offset the sales decline in international markets. Color cosmetics make up for 60% of Revlon's stock value.

After acquiring Sinful Colors in March last year, Revlon has recently added certain assets of Bari Cosmetics, including assets related to the Pure Ice nail enamel, as well as other brands, in order to further strengthen its leading market share in color cosmetics segment in the U.S.

See Our Full Analysis for Revlon Stock

Debt Burden, Small Marketing Budgets Limit Reach

With annual sales of close to $1.4 billion, Revlon competes with beauty product giants like L'Oreal and Estee Lauder, that generate $25 billion and $10 billion in annual sales globally. The beauty company also suffers with weak cash flows and high debt burden (Revlon has debt in excess of $1.1 billion) which puts it in a highly unenviable position while competing against giants such as L'Oreal (OTCPK:LRLCY) and Estee Lauder (NYSE:EL) that have stronger marketing and R&D budgets to expand market share.

This has also constrained Revlon's ability to expand presence in emerging markets like Asia-Pacific and China, that have been the primary growth drivers for L'Oreal and Estee Lauder over the last few quarters. Last quarter, Revlon's sales in Asia-Pacific declined 4.6% and those in Europe, Middle East and Africa declined 14.6%. Apart from lower net sales for Revlon color cosmetics in China, France, Italy and Australia and weak fragrance sales in the U.K., the decline was further accentuated by highly unfavorable currency fluctuations.

We have a revised $17 price estimate for the Revlon stock.

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