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Revlon declares bankruptcy and we tell you the reasons

Although it seems hard to believe, it is already a fact: Revlon files for bankruptcy. After growing up with the brand not only in our teens with its lipsticksbases and enamels, but also in our adult life with products that have gone viral in TikToklike the famous thermal brush or the roller that absorbs facial shine, it seems that the company does not have a very promising future for the following year.

After a 46% crash in its shares on Friday, June 10, last 16 of the current month Revlon filed for bankruptcy and, according to Reuters, has already received bankruptcy court approval for a $375 million loan to help solve its supply chain problems. Read on to find out what led to the beauty company’s downfall and the impact on the industry.

Why is Revlon bankrupt?

The brand that was founded in 1932 by Charles Revlon and that includes other (very) well-known ones, such as Almay, CND and Elizabeth Arden, was forced to go bankrupt for various reasons. The main one is that Revlon it does not have the capacity to meet its demand for the sale of products, since it does not have sufficient access to raw materials; Reuters he notes that the company today can only fill “70% of customer orders without delays or cancellations, compared to the industry standard of 90-95%.”

This data was revealed by Robert Caruso, the restructuring director of Revlonadding that ‘most suppliers of raw materials from Revlon they stopped making shipments and many demanded payment of past debts or deposits on future deliveries. No access to raw materials, Revlon cannot meet sales demandsleaving the company with less cash to solve its supply problem.’

However, that is not the only cause. Revlon has been dragging a debt for years, because in 2016, according to New York Times, bought Elizabeth Arden through loans; then, in 2019, it was reported that the brand had made a loss of up to 151.2 million dollars and, with the arrival of the pandemic, Reuters He shared that sales decreased, which led to a cut of 1,000 positions in the company to improve profitability, which to date has not had the expected results.

Another factor that the industry has detected is the strong competition from new beauty brands. Although Revlon has tried to evolve its business by introducing a more diverse and sustainable concept, and has even supported important celebrities, such as in 2018 when it chose Gal Gadot as her ambassador, the company has had to deal with the rise of new celebrity beauty brands, such as Rihanna’s Fenty Beauty, the youngest of the Kardashians’ Kylie Cosmetics, and Selena Gomez’s Rare Beauty. Coupled with its weak ability to sustain its supply chain, the brand has found it difficult to stay afloat and sees the impact in 2023 could be even greater.

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