Revlon is facing a fight to stay alive after suffering its biggest one-day share price drop on record. Photo / Babiche Martens
Revlon is facing a fight to stay alive after suffering its biggest one-day share price drop on record. Photo / Babiche Martens
Cosmetics giant Revlon is facing a fight to stay alive as it suffered its biggest one-day share price drop on record and it reportedly prepares to file for bankruptcy
The global brand has been suffering amid fierce competition in the cosmetics industry, global economic pressures and supply-chain issues.
However, it went from bad to worse overnight as the company took an almighty hammering on the stock market — dropping 53 per cent on Friday to $2.05 a share.
This came amid a report by news outlet Reorg stating the cosmetics empire is preparing to file for bankruptcy.
The company, controlled by billionaire Ronald Perelman, could file as soon as next week, Reorg said, citing unnamed sources.
Revlon's share price was hammered overnight. Photo / Supplied
Bloomberg reports New York-based Revlon has struggled to remain relevant and stem falling sales amid competition from Estee Lauder Cos. and of smaller companies using social media to lure customers. That was only made worse when Covid-19 lockdowns sent demand for makeup plunging.
The company also faces financial headaches.
The Wall Street Journal reports the company's nearest upcoming debt maturity is in September 2023 and involves an $US866 million ($1.1b) loan that was paid off by accident in 2020 by administrative agent Citigroup with its own money rather than Revlon's.
Some lenders gave the money back to Citi, but others kept roughly $US500 million ($709m) of the accidental payment.
Citi sued them for the money but was denied its request by a federal judge last year. The bank has appealed, and an appellate decision is pending. Revlon still owes the loan, however the appeals court rules.
The future of Revlon hangs in the balance and the prospect of Chapter 11 Bankruptcy in the US looms for the cosmetics company.
When multinationals such as Revlon are put into Chapter 11 Bankruptcy – a move that buys a company time to reorganise its debts and assets – they typically keep their subsidiaries as a whole.
The company's Australian arm is still profitable but it could be sold by the parent company.
Revlon's Australian subsidiary has lodged accounts for 2021 showing it has been profitable in the past two years, despite facing headwinds related to the global pandemic.
Stocks tumble worldwide as US inflation soars
Revlon wasn't the only company to be hammered overnight as the global economy took another major hit.
Stock markets plunged deeper into the red on Friday after data showed US inflation soared to the highest level in more than 40 years in May, far outpacing analysts' expectations.
In Europe, all of the major stock indices ended the week sharply lower. Paris's blue-chip CAC 40 lost 2.7 per cent on Friday, Frankfurt's DAX index was down 3.1 per cent, Milan's FTSE MIB shed 5.1 per cent, Madrid's IBEX tumbled 3.7 per cent and London's FTSE dropped by 2.1 per cent.
On Wall Street, stocks also were deep in negative territory after US government data showed inflation reached 8.6 per cent in the 12 months ended in May, the steepest rise in consumer prices since December 1981, on the back of surging energy and food prices.
The data had been eagerly anticipated as investors hungrily look for clues as to the direction of US interest rates at next week's meeting of the Federal Reserve.
"The market had expected that we'd see at least a plateauing or flattening out of inflation but it seems that inflation pressures continue to build and we've seen a further broadening of price pressures," said Shaun Osborne, a foreign exchange specialist at Scotiabank.
"So it seems more entrenched, stickier kind of price or inflation situation."
