Cosmetics giant Revlon filed for Chapter 11 bankruptcy protection on Wednesday evening as it grappled with a cumbersome debt load and a snarled supply chain.
Established in New York City in 1932, Revlon built a cosmetics empire on red nail polish, with lipstick to match, according to the New York Times. But the tried-and-true brand came up against a new generation of upstarts in recent years and has lost its shine.
In its bankruptcy filing on June 16, the company said it expects to receive $575 million in financing from its existing lenders, which will allow it to keep its day-to-day operations running, reports CBC Canada News.
“Today’s filing will allow Revlon to offer our consumers the iconic products we have delivered for decades, while providing a clearer path for our future growth,” said Debra Perelman, who was named Revlon president and CEO in 2018.
Her father, billionaire Ron Perelman, backs the company through MacAndrews & Forbes, which acquired the business through a hostile takeover in the late 1980s. Revlon went public in 1996.
According to the filing with the U.S. Bankruptcy Court for the Southern District of New York, Revlon listed assets and liabilities between $1 billion and $10 billion, reports Reuters.
With brands from Almay to Elizabeth Arden, Revlon had been a mainstay on store shelves for decades. However, the struggle with heavy debt, along with stiff competition and supply chain issues – and an added failure to keep pace with changing beauty tastes proved to be an overwhelming burden.
Changing tastes in cosmetics date back to the 1990s when women began to prefer more muted tones in lipsticks, rather than the bright colors Revlon was known for. Besides increased competition, the Coronavirus pandemic in 2020, with its forced lockdowns, left consumers reluctant to spend money, according to CNBC News.
Revlon could use its time in bankruptcy proceedings to prune its portfolio, given it owns numerous brands, some of which are performing better than others, said David Silverman, a retail senior director at Fitch Ratings.
“If executed effectively, Revlon could emerge from bankruptcy with a cleaner balance sheet and a better operating profile, improving longer-term business prospects,” Silverman said.
Revlon’s bankruptcy could be a sign of more trouble to come for consumer brands, bankruptcy advisers said. High inflation, rising interest rates, and warnings of a recession have made shoppers warier in opening their wallets.
