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Here’s why Revlon just filed for bankruptcy—no, it’s not because of the #NoMakeup movement

Following years of financial troubles, Revlon’s filing comes at a time of shifting competition in the beauty industry.

Here’s why Revlon just filed for bankruptcy—no, it’s not because of the #NoMakeup movement
[Source Images: Revlon; WestEnd61/Getty]

Revlon Inc., the 90-year-old cosmetics company, filed for bankruptcy today, citing mounting debts, supply-chain issues, and industry competition as leading causes. Ahead of its chapter 11 filing this morning, Ron Perelman, who acquired Revlon for $2.7 billion in 1985, had engaged in restructuring talks with potential new lenders. Revlon is one of Perelman’s last major holdings at his investment firm McAndrews & Forbes Inc., and Perelman owns nearly 85% of the cosmetic company’s shares.  

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The filing follows years of financial turmoil at Revlon. Even before the COVID-19 pandemic, the company was struggling with debts amidst heightened competition in the industry and changing consumer cosmetic tastes. In 2020, Revlon announced that after garnering enough financial support from its existing bondholders, it only narrowly avoided bankruptcy.  

Revlon’s stock has fallen over 80% since the beginning of the year. How did the beauty company, known for its nail polishes and lipstick, go from the longest-standing sponsor of the Oscars to filing for bankruptcy? Here are a few reasons:

  • There was too much debt. Revlon estimates that its liabilities land anywhere between $1 billion and $10 billion, according to a court filing. The company plans on receiving $575 million in debtor-in-possession financing from existing lenders, a sum that will potentially allow the cosmetics line to continue its operations. “Our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand,” Debra Perelman, Revlon’s president and CEO, said in a press release. “By addressing these complex legacy debt constraints, we expect to be able to simplify our capital structure and significantly reduce our debt, enabling us to unlock the full potential of our globally recognized brands.”
  • Supply-chain issues brought on by the pandemic. Revlon’s financial troubles come at a time of widespread turmoil in the beauty sector following the peak of pandemic lockdowns. Between ingredient shortagesincluding paper, glass, and other key oils—as well as a spike in ingredient prices, cosmetic companies globally are facing similar issues. Rising prices for raw materials, energy, and packaging have pushed the costs of cosmetics production up by 25-30%, according to consultancy firm Bain & Company. As demand for products remains relatively stable, these cost hikes pose major challenges for companies, especially for companies like Revlon with pre-existing financial troubles.  
  • Revlon is competing with top-name celebrities. It couldn’t keep up. Traditional beauty brands like Revlon have found themselves competing against not only each other, but celebrity-backed brands like Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty. But it’s more than just A-list stars. There are fewer and fewer barriers to not only launching a beauty brand, but to promoting one. Between platforms like TikTok and Instagram, influencers at all levels can reach consumers in new ways. For more generic beauty companies like Revlon, this is steep competition.
  • American malls are dying. Though shopping mall foot traffic exceeded pre-pandemic levels in July 2021 for the first time since 2019, the rise of online retailers and shifting consumer preferences in the last 10 years have decimated the once standard American shopping experience. For brands like Revlon, where products are found through retailers like Bed Bath & Beyond, Walmart, and Ulta, these shopping preferences are sure to be felt. Bed Bath & Beyond alone announced the closure of 37 stores across 19 states in February.  

Revlon expects to maintain standard operations despite its bankruptcy filing. According to a press release on post-filing proceedings, the company will continue to pay vendors and partners without disruption.  

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