One of the world’s best-known cosmetics brands is facing a struggle to stay alive after suffering its biggest single-day share price drop on record.
Cosmetics giant Revlon faces a fight to stay alive as it suffered its biggest one-day share price drop on record and reportedly prepares to file for bankruptcy
The global brand is suffering from fierce competition in the cosmetics industry, global economic pressures and supply chain issues.
However, the situation went from bad to worse overnight as the company took an almighty hammer blow to the stock market – dropping 53% on Friday to $2.05 per share.
It came amid a worrying debt-stressed report, Reorg, saying the cosmetics empire was preparing to file for bankruptcy.
The company, controlled by billionaire Ronald Perelman, could file as early as next week, Reorg said, citing unnamed sources.
Bloomberg reports that New York-based Revlon has struggled to stay relevant and stem declining sales in the face of competition from Estee Lauder Cos. and small businesses using social media to attract customers. And it only got worse when the Covid-19 lockdowns caused demand for makeup to plummet.
The company also faces financial headaches.
The the wall street journal reports that the company’s next debt maturity is September 2023 and involves an $866 million ($1.1 billion) loan that was accidentally repaid in 2020 by administrative agent Citigroup with its own money rather than Revlon’s.
Some lenders returned the money to Citi, but others kept about $500 million ($709 million) from the accidental payment.
Citi sued them for the money but was denied its claim by a federal judge last year. The bank has appealed and an appeal decision is pending. Revlon still owes the loan, but the appeals court rules.
Revlon’s future hangs in the balance with the prospect of a Chapter 11 bankruptcy in the United States looming for the cosmetics company.
When multinationals such as Revlon are filed for Chapter 11 bankruptcy — a move that buys a company time to reorganize its debts and assets — they typically keep their subsidiaries as a whole.
The company’s Australian subsidiary is still profitable but could be sold by the parent company.
Revlon’s Australian subsidiary has filed accounts for 2021 showing it has been profitable for the past two years, despite headwinds from the global pandemic.
Stocks fall worldwide as US inflation soars
Revlon wasn’t the only company to be hammered overnight as the global economy took another big hit.
Stock markets plunged deeper into the red on Friday after data showed U.S. inflation hit its highest level in more than 40 years in May, far exceeding analysts’ expectations.
In Europe, all the main stock indices ended the week sharply lower. Paris’ blue-chip CAC 40 was down 2.7% on Friday, Frankfurt’s DAX was down 3.1%, Milan’s FTSE MIB was down 5.1%, Madrid’s IBEX fell 3.7% and London’s FTSE fell 2.1%.
On Wall Street, stocks were also deep in negative territory after US government data showed inflation hit 8.6% in the 12 months to May, the biggest rise in consumer prices. since December 1981, due to soaring energy and food prices.
The data was eagerly awaited as investors eagerly search for clues on the direction of US interest rates at next week’s Federal Reserve meeting.
“The market was expecting us to see inflation at least plateauing or flattening, but it looks like inflationary pressures are continuing to build and we have seen further amplification of price pressures,” said Shaun Osborne, foreign exchange specialist at Scotiabank.
“So it seems more entrenched, more sticky, a price or inflation situation.”
— with AFP