Revlon SWOT and PESTLE Analysis

Strength

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Weakness

1. Weak Digital Presence: In spite of adopting Amazon as its e-commerce partner, only 5-6 % of its sales come from online channels. COO Chris Peterson says that although the company had a 32% YOY digital growth but it has not yet realized the benefits of its investments in these channels. It is still trying to enhance the customer engagements through social media etc., where its competitors like L’Oréal have moved way forward. The company is trying to make its online experience seamless by helping the customers to buy its products easily but the results are yet to be seen. L’Oréal recently acquired the virtual makeover app ModiFace to increase its digital experience and give a virtual makeup experience for the consumers whereas Revlon has no such presence to fight against it. Revlon has taken various initiatives for digital marketing, but to attract the current generation, who have made their world around their handset, it still needs to work hard and develop mobile marketing campaigns through apps and other media.

2. Debt Heavy Capital Structure: Acquisition of Elizabeth Arden in 2016 cost the company a cash purchase price of $1034.3 million, for which it entered into a 7 year $1800 million senior secured term facility which has made its balance sheet debt heavy. It could and may have also affected the company's operations & flexibility adversely as the company has to use its cash equivalents to service the debt. Company's total indebtedness was $2756.8 million as of December 31, 2016 which has increased its investment risk substantially. It carries the risk of not being able to make regular payments of principal & interest due to its insufficient profits and cash flows. It may be also at a competitive disadvantage in comparison to its competitors who have less debt. Also after the acquisition, the company has still not declared profits which further makes it weak compared to its competitors like Estee Lauder, L’Oréal, etc.

Opportunity

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Threat

1. Strong Competition from Big brands like Estee Lauder, L’Oréal and others: Increase in competition from various competitors like L’Oréal, P&G, Avon Products, Inc., Mary Kay Inc., Estee Lauder etc., can adversely affect company's business operations, future prospects, financial health and cash flows required for investments. Most of its competitors have deep pockets and global presence well before its entry into those markets, which may force the company on aggressive spending on acquisition, research & development. Also over the years, the company has seen a decline in sales of products from color cosmetic category in the U.S. and may lose further in terms of market share to its competitors. If it wants to increase or maintain the current sales of these products, it has to increase its promotional activities and be more flexible towards its pricing strategy. A major shift in pay levels in china and other nations to almost $15 an hour may also influence expenses for the company. Despite of taking various technological initiatives, Revlon is yet to match its competitors which may lead to a medium or long term threat.

2. Decrease in consumer spending for beauty products: Purchasing habits of consumers are changing due to various reasons one of which is deteriorating economic conditions for a large section of consumer base. Independent brands are becoming more popular and using celebrities for marketing campaigns may be not producing sufficient fruitful results as consumers are getting more influenced by their friends, family and colleagues which Revlon is not able to cope up with. As most of its sales come from foreign countries, adverse change in the currency exchange rate and government mandated pricing control in some countries is also affecting the business in a negative way. Channels through which consumers are making purchases is also changing and moving towards e-commerce sites which the company has been to exploit only partially. It has a small number of brands catering to cosmetic and beauty needs of men which is evolving and gaining momentum. Due to changing needs and behaviour of consumers, Revlon has more cash requirements for promotional activities etc. which it is not able to meet due to recent acquisition of Elizabeth Arden.

Political

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Economic

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Social

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Technological

1. Deal with Amazon to increase digital foot print: With its strategy to sell products through Omni channel, Revlon made a deal with Amazon in 2017 to sell its products. Although only 5% of the sales are coming through sales via e-commerce, Revlon has lots of opportunities to increase its revenue by partnering up with other e-commerce sites to sell some range of exclusive products. Penetration of internet and availability of apps on mobile for shopping has made it easier for the consumers to order all kinds of products and so has increased the reach of Revlon to its beauty products consumers.

2. Patenting & Proprietary technology for some products: The Company has patented formulation of many of its products under the U.S. Patent Act. It uses certain proprietary and patented technologies for formulation, packaging and manufacturing of its products. So its technology is one of the most important factors which if leaked can create disruptions in the company. Some of the proprietary technologies have been used in products like Revlon Age Defying cosmetics, Almay SmartShade makeup, Revlon ColorSilk hair colour, Prevage and the Elizabeth Arden Ceramide skin care lines, Mitchum anti-perspirant deodorants, CND Shellac nail color systems and CND Vinylux nail polishes. Also it files patents for any new technology developed during the ordinary course of business to protect itself from copycats and maintain exclusivity.

Legal

1. Class Action Law suits after acquisition of Elizabeth Arden: Many shareholders filed class action lawsuits along with a derivative lawsuit to challenge the acquisition of Elizabeth Arden in 2016 which may be still pending. These lawsuits if don’t go in favour of the company may result in substantial pay-out to the shareholders. Mainly 5 individual complaints had been consolidated into a single law suit before the acquisition and a second consolidated lawsuit was also filed after the acquisition was complete. The company however believes that no material adverse effect will be done to it after all the legal proceedings are resolved. In the future if any merger or acquisition is carried out, the company can take proper measures to avoid these kinds of lawsuits. All these legal proceedings tarnish its image and may sometimes prove to be detrimental to its operations and may result in a small or a huge liability imposition.

2. Personal Care Products Safety Act (PCPSA) banning some ingredients in various beauty products: Beauty industry as a whole was affected by the enactment of PCPSA, which calls for regulation of various chemicals and other constituents in beauty products. FDA has got a stronger hold on players of the beauty industry after the law was passed and now has the ability to recall any dangerous product of it receives any complaints from the consumer and all the companies are required to disclose which ingredients they are using in their products. All the products of Revlon use ingredients approved by FDA however the clause for declaration of all the ingredients of the products before selling to the consumer may have put some strain on the proprietary technology and methods used by the company. However this kind of regulation gives rise to a safe image of its products in front of the consumers.

Environmental

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