As reported by CNBC, cosmetics giant Revlon filed for Chapter 11 bankruptcy protection on Wednesday evening as it grappled with a $3.7 Billion debt load and an entangled supply chain.
“The 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 Revlon President and Chief Executive Officer, Debra Perelman, in a press release issued Thursday morning.“Our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand.”
Revlon specified in a note that it is currently unable to timely fill almost one-third of customer demand for its products due to an inability to source a sufficient and regular supply of raw materials. Shipping components from China to the United States takes Revlon 8 to 12 weeks and costs x4 2019 prices.
Revlon is the first major consumer-facing business to file for bankruptcy protection while already more than three dozen retailers filed for bankruptcy in 2020.
The difficult financial situation of the American Brand Revlon – which also houses brands including Almay, Elizabeth Arden New York, Mitchum, and CND, to name a few – comes from a long decline in sales, unfulfilled supply chain demands, and more.
According to The Wall Street Journal, the potential filing grew out of talks with lenders on debt that begins to mature next year. On Friday, June 10, Reuters reported a record-breaking drop as Revlon’s stock plummeted by 46 per cent the company’s stock now stands at $1.17 per share. That is why, according to Women’s Wear Daily, Ronald Perelman, the largest shareholder of the brand, began to liquidate his assets in 2020, illustrating the company’s decline.
Another confirmation came from Business of Fashion which quoted chief executive officer Debra Perelman, acknowledging the company’s decline and expressing the inability to meet product demand with inflation at an all-time high.
The publication also reveals that Revlon’s potential bankruptcy is partially brought on by more than $3.7 Billion dollars of long-term debt. In hopes of steering the company away from bankruptcy back in 2020, Revlon sought out several potential lenders to aid the debt accumulated. Although it was not able to meet its intended funding goal, it did gain refinancing of $1.8 Billion of debt.
On top of that, Revlon’s financial struggle was exacerbated by the pandemic so that last year it paid well over twice in interest expenses than what it pulled in in operating income.
In 2020, its sales fell by more than half a billion dollars and its net loss nearly quadrupled, before easing in 2021.