After the announcement of a new corporate structure, shares of Revlon Inc. rocketed by 15% in the middle of January.
Data coming from the S&P Global Market Intelligence attributes the bulk of the gain when the plan for organizational restructuring was publicized; REV shares surged 7% on that day.
After struggling in recent years, Revlon revealed plans to reorganize its brands into four separate divisions. This new structure, according to the cosmetics titan, would focus on building brand equity and eventually aid in meeting the company’s long-term growth targets, following the $870 million acquisition of Elizabeth Arden, a cosmetics, skin care and fragrance company, last September.
The restructuring could also help in making the company more effectively compete in the global beauty industry.
The brand-centric formation will be based around its namesake Revlon brand, Elizabeth Arden, Fragrances and Portfolio Brands divisions. Revlon President and CEO Fabian Garcia claimed the new structure will “leverage the strength of our brands, and better focus on and serve our beauty consumers and quickly adapt to their changing behaviors and preferences.”
To guarantee that Revlon also benefits from its extensive commercial expertise and continues to improve strategic customer relationships, a new customer-facing regional structure will boost global sales and brand presence behind five regions in North America, Europe, Middle East & Africa, Asia, Latin America, including Mexico, and the Pacific, which includes Australia and New Zealand.
To better support the new brand-centric and regional structures, the enabling functions, inclusive of Finance, Human Resources, Supply Chain, Research & Development, Legal, and Communications & Corporate Social Responsibility, will also restructure their departments.
The new corporate restructuring also allows the cosmetics giant to continue to build on its strategy for growth, streamlines and simplifies the methods of working and draws together an experienced, passionate and talented leadership team that will help accomplish the company’s vision and growth aspirations.
REV Stock Analysis
The Revlon stock has been volatile in recent years as legacy cosmetics firms have the rise with the rise of new competition from store-based brands such as Sephora, Mac and Ulta. Elizabeth Arden, its September acquisition, witnessed its value significantly erode. Meanwhile, Procter & Gamble recently sold its Cover Girl line to Coty.
The $3 billion combined beauty company has a various portfolio of iconic brands with product offerings in color cosmetics, skincare, fragrance, hair color and hair care, beauty tools, men’s grooming products, anti-perspirant deodorants and other beauty care products, sold in around 150 countries through an assortment of distribution channels.
Shares of Revlon were inactive in today’s afterhours, but they've underperformed in the last three months and in 2016. REV fell 9% in the past three months, compared with a 7% gain for the S&P 500 and climbed 15% from three months ago, compared with a surge of 21% for the index.
In the last session, Revlon inched up 2.99% or $1.00 to trade at $34.45. It is currently testing on support level 33.43 while resistance remains at 35.00. There will be more movement after its earnings report later in the month. Revlon could remain lifted as Wall Street often becomes optimistic on restructuring plans, and it makes sense to do one after an acquisition like Elizabeth Arden.
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