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Red flag: Revlon’s bankruptcy is more than just the loss of a household name

REVLON’S bankruptcy comes as companies are recovering from the Covid-19 pandemic. The pandemic was tough on the fashion industry, with sales decreasing across the globe.

REVLON’S bankruptcy comes as companies are recovering from the Covid-19 pandemic. The pandemic was tough on the fashion industry, with sales decreasing across the globe.

Published Jun 20, 2022

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My relationship with Revlon products started when I was transitioning from adolescence to adulthood. Having a red Revlon lipstick was like a right of passage. Even when I was around five years old, I would beg my mom to let me use one of her red Revlon lipsticks.

Over the years, I used their products and loved them. Even today, a Revlon lipstick is always in my make-up bag, without fail. It is my go-to when the other brands fail me. So imagine the shock and horror I experienced when I learned that the company filed for bankruptcy in the United States.

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When I heard the news, I started to think: Should I panic buy their lipsticks and nail polish? But then I dismissed the thought as I remembered panic buying during the pandemic was unnecessary. Besides, Revlon South Africa might still be in business, and I might not even need to be worried.

While the news that Revlon Inc filed for Chapter 11 bankruptcy protection in the US was publicised globally, there has been no word on how Revlon South Africa would be affected. There is a chance that the South African division might experience some changes; as to what extent, only time would tell.

The 90-year-old nail polish and lipstick maker filed Chapter 11 with the US Bankruptcy Court for the Southern District of New York last week.

Sales of the cosmetic giant struggled amid supply bottlenecks and a failure to swiftly switch to in-demand skincare, losing shelf space in US stores to startups. Revlon is also grappling with a debt load; it reportedly has long-term debt of $3.31 billion (R53bn) as of March 3.

In a statement, Revlon president and chief executive Debra Perelman said: "The filing would allow Revlon to offer our consumers the iconic products we have delivered for decades, while providing a clearer path for our future growth."

Revlon's bankruptcy comes as companies are recovering from the Covid-19 pandemic. The pandemic was tough on the fashion industry, with sales decreasing across the globe. Many companies, especially those with more traditional business models, were already struggling to adapt to a new retail environment or keep up with more digitally savvy competitors.

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According to the SA Cosmetics Industry Report 2021, consumer spending patterns were reflecting the economic downturn caused by the impact of the pandemic, with spending focused on essential items.

I thought Revlon had survived the pandemic. I never thought the company would be signing up for bankruptcy.

This despite the well-known lipstick index.

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The term "lipstick index" was coined by Leonard Lauder, chairman of Estée Lauder, during the 2001 recession, as an economic indicator. Lipstick sales increased in the early 2000's recession as women would purchase lipsticks as an affordable luxury instead of expensive apparel items.

So if times are so tough that even an iconic lipstick company can’t survive, what does this mean for the rest of the business world and consumers as the word “recession” hangs on economists lips amid high inflation?

But on a more personal level, what is going to happen to the right of passage for my daughter? She has just started to beg me to buy her lipstick. Do I now find another brand? Revlon has history, it has been trusted.

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Even when I told my friends that I would be writing about Revlon filing for bankruptcy, they reacted with disbelief. It's just too shocking! How could such a trusted household brand collapse?

Experts say if Revlon executes the bankruptcy effectively, it could emerge with a cleaner balance sheet and a better operating profile, improving longer-term business prospects.

While Revlon South Africa is mum about the bankruptcy, even some retailers, such as Dis-Chem, who carry their products, were unavailable for comment regarding the impact the bankruptcy would have on them.

Only time will tell what will happen to the South African arm of the brand. I hope the company makes it.

South Africa has a high unemployment rate and it would be sad if some employees would be affected by the bankruptcy.

This as low-cost airline Comair also recently filed for bankruptcy and many other firms struggle to survive.

But while we know aviation is a dicey business, lipstick is another matter. It is something to brighten up your day in times of turmoil.

But while you can put lipstick on a pig, or so they say, when a famous lipstick company goes bust amid tough economic times, we should all be concerned.

BUSINESS REPORT

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