Painting A New Face On Revlon

Married three times and a notorious philanderer, Charles Revson never got along with women. But he sure knew how to sell to them. For decades, Revson's Revlon Inc. was the last word in beauty.

But by 1985, Revson was long gone, his successor, Michel Bergerac, was a flop, and raider Ronald O. Perelman had taken over. Perelman, who knows more about leverage than lipstick, loaded a horrifying $2.9 billion in debt onto the company's balance sheet. Wall Street watched with morbid fascination as Revlon flirted with default. And while the cigar-waving financier and socialite wrestled with his credit tab, Revlon's glamour faded.

Now, it looks as if this Fifth Avenue fable may have a happy ending. Revlon's debt is under control. Innovation has begun again. And the company has its target customer firmly in sight. Indeed, while Revson's magic is missing, his empire is largely intact.

HOT ISSUE. Perelman's endgame is set to start in two months, when Revlon hopes to sell stock to the public. Revlon has yet to announce the offering, but Perelman aims to peddle 15% to 18% of his wholly owned concern, raising $400 million to $600 million in fresh capital. Much of that will go to pay off borrowings. To date, he has whittled debt down to $750 million, less than a quarter of its peak three years ago (table). "That's not bad work," boasts his chief lieutenant, Howard Gittis.

How did Perelman pull it off? Partly by selling assets. Among them: Max Factor, acquired in 1986, and Beatrix, which Perelman bought in 1989. Both were sold to Procter & Gamble Co. for $1.2 billion last year--double what Perelman paid. The financier also siphoned off some of the take from initial public offerings of stock in other companies. About 75% of the $48 million raised last summer in the stock sale of comic-book giant Marvel Entertainment Group, known for its Spider-Man and The Incredible Hulk, went into Revlon's coffers. And 10% of the $83 million he raised with Coleman Co., the camping-equipment maker, went to Revlon.

Odds are that Revlon's stock sale will be one of the hot issues of the year. Cash flow now comfortably covers interest payments. Meanwhile, the IPO market keeps roaring, and Perelman has a hot hand: Since it went public in February, Coleman is up 14%, to 29. Marvel has tripled, to 30, since its IPO last July.

Wall Street may be happy, but Perelman has yet to prove he can cut it uptown. So far, his performance as a makeup marketer has been mixed. Soon after taking control of Revlon, Perelman allowed the company's managers to divert it from the mass market toward the prestige department-store business. To support the redirection, Perelman bought Germaine Monteil, among others. However, Revlon had trouble competing against seasoned and popular upscale lines such as Estee Lauder and Chanel.

While Revlon floundered at the high end of the market, the cosmetics business got tougher. International juggernauts, such as Nestle's Cosmair, Procter & Gamble, and Unilever, now dominate with multiple brands. And the ideal cosmetics customers--young women--have turned from department stores to mass-market outlets such as supermarkets, drugstores, and Wal-Mart Stores Inc.

Lately, the job of persuading those women to use Revlon--probably their mothers' brand--has fallen to Jerry W. Levin, former director of mergers and acquisitions at Pillsbury Co. and onetime chairman of Pillsbury's Burger King and Haagen-Dazs units. "Levin knows how to bring operating profits up but doesn't talk about product introductions and image-building," says Allan R. Mottus, a comestics-industry consultant. Levin is mum. But Revlon says Perelman is happy with his president of 11 months. "Jerry Levin has surrounded himself with cosmetics and consumer-products professionals," says a spokesman. "He does not expect to be regarded as the next Charles Revson."

Cosmetics retailers give Levin high marks for plans to boost Revlon's advertising spending by 25% this year, to $200 million. Revlon's campaigns badly need an overhaul, says Suzanne Grayson, a Santa Barbara (Calif.) marketing consultant who headed Revlon marketing under Revson. "They really don't support their brands," she says.

Consider the "Unforgettable Woman" campaign. These ads, featuring such celebrities as Oprah Winfrey, Audrey Hepburn, and Nancy Sinatra, were meant to boost the Revlon name, not to promote any specific product. A mistake, it turns out: Women respond to ads that stress a particular makeup. And many of the celebrities proved too old to appeal to Revlon's target audience. Newer Revlon ads feature supermodels Claudia Schiffer, 21, and Cindy Crawford, 26, newly married to Hollywood's Richard Gere.

The fresh ads may already be helping. Market share inched up in 1991. And in one crucial arena, Revlon is the market leader: the lipstick, eye shadow, and nail polish sold in drugstores. "Revlon is still a very powerful name with the consumer," says Carol Robinson, a vice-president at Youngstown-based Phar-Mor of Ohio Inc., a 291-store drugstore chain.

Revlon has even improved new-product development--a decided weakness since Revson's departure. The Nakeds, a two-year-old part of the Ultima II line, is selling well to teens. And cosmetics buyers have given new products, including Velvet Touch lipsticks and Impulse mascaras high marks. Revlon's newest try is Essentials, "environmentally correct" makeup a la The Body Shop's line.

The inspirational genius that dreamed up Cherries in the Snow, a 1950s Revson color, is gone. But less red on Revlon's balance sheet suggests that the change in raider-turned-manager Perelman may be more than cosmetic.

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