Putting A Pretty Face On Revlon

Can Coke veteran Jack Stahl really make a difference at the cosmetics giant?

Once a month, Revlon (REV ) employees get the chance to ask Chief Executive Jack Stahl anything they wish. In mid-September, the conference room at the cosmetics company's Manhattan headquarters is packed, and many of the questions concern Revlon's ungainly financial situation. The company is struggling under $1.76 billion in debt, has repeatedly failed to generate enough cash to pay the interest it owes, and avoided bankruptcy last winter only because financier Ronald O. Perelman, its mercurial controlling shareholder, bailed it out. "For two years, the financial picture has been a little bleak, but you should be comfortable we don't have an Enron situation going on," says Stahl, as the room falls silent. "We're confronting it head-on. I can't say we're 100% secure, but we're 98% secure."


That may be cold comfort. But at least it's a refreshing degree of candor at an organization used to CEOs lording it over employees and fiefdoms so fractious they seldom communicated at all. The results were predictable: New products and consumer promotions were late to stores, marketing was inconsistent, and millions of dollars were wasted through sheer inefficiency. Revlon's revenues fell by more than 40% from 1998 to 2002, to $1.12 billion, and the decision by Stahl's predecessor to sell off several units to raise cash is only partly to blame. The company has racked up operating losses for 19 consecutive quarters. Revlon, which created the idea of affordable glamour, is now "one of those lost brands," says Marc Gobé, chairman of marketing consultant Desgrippes Gobé in New York.

Stahl, who came to Revlon in February, 2002, after 22 years at Coca-Cola Co. (KO ), prefers to say that the company had lost its way. "A lot of things were just not working right," he says. And now they do seem to be working better. Stahl has smoothed out many kinks in Revlon's operations and, yes, has even gotten the core Revlon and Almay brands growing again in the face of deep-pocketed rivals such as Procter & Gamble Co.'s Cover Girl and L'Oréal's Maybelline.

The problem is, those gains have come at the cost of a glamour blitz (think Halle Berry and Julianne Moore) that many Revlon watchers believe a company in Revlon's financial straits can't afford for long. What Revlon needs is an extreme makeover. And Stahl -- the company's third CEO in four years -- would seem to be an odd choice to try. He knew nothing about the beauty business and at Coke had concerned himself more with finance than marketing. But he brought to Revlon, a company with credibility problems if there ever was one, a reputation for forging close relationships with retailers and communicating well with Wall Street. And at Coke, he succeeded in getting the long-feuding bottle and fountain divisions to work together. Not least, with his 50th birthday looming, Stahl was looking for more of a challenge than the other CEO jobs that were dangled before him when he left Coke after his mentor, M. Douglas Ivester, was pushed out in 2000.

At Revlon, Stahl has tried to shake off the bureaucratic, hierarchical Coke way of doing business. By putting industry newcomers (often other Coke exiles) in key slots, he has challenged accepted wisdom on everything from packaging to dealing with retailers. Stahl claims to have already cut $100 million in yearly costs. But he's blown through that much and more in marketing and new-product launches. He also seems to have ended the routine bungling that too often left important retailers fuming. "Jack has been more hands-on and more willing to engage in dialogue than any CEO in the past," says Chris Bodine, merchandising chief at drugstore chain CVS Corp. (CVS ), who has dealt with three regimes at Revlon. Over the past year, the Revlon brand has reclaimed a point of market share, growing to 17.3%, according to AC Nielsen data, while Almay has held steady at 5.5%. In 1997, Revlon controlled 28% of the market.

Today, the company isn't making a dime -- and Stahl can't get away with that for long. Sales may be rising, but only because of a pricey ad blitz that some outside Revlon think is unsustainable. "Jack Stahl has done a good job, but they're burning through cash," says Standard & Poor's credit analyst Lori Harris, who warns of another downgrade of Revlon debt, currently rated a highly speculative CCC+. That may be why the exec who pushed the campaign, Stahl's handpicked marketing chief, Debra Leipman-Yale, abruptly departed in early October. Her successor, Stephanie Klein Peponis, a Boston Consulting Group Inc. vet who had been working with Revlon, says she has a new plan, which calls for streamlining marketing by being more strategic with ads. "It's all about doing more with less," she says.

The real dilemma for Stahl, though, is that no matter what else he does, he still has to contend with a debt load that is one-and-a-half times as large as the company's annual sales. With the company's debt starting to come due in 2005, "something has to happen," Harris says. Right now, there are no indications that Perelman, who took on the debt when he bought out the company in 1985, will close his wallet anytime soon. "A Revlon bankruptcy proceeding is not a possibility," says a Perelman spokesman.

Although the pressure is unrelenting, Stahl seems to like being boss. He often scraps the suit and tie that was required at Coke, and he needles a colleague from Atlanta, Tom Maguire, now Revlon's chief financial officer, for being unable to make the adjustment. ("But I wore a sports jacket today!" Maguire objects at one meeting.) Stahl has tried to put his staff at ease with his casual, just-call-me-Jack approach. He makes it a point to accompany them on visits to consumers' homes and prowls of retail stores. When relocating the company in October from its famously grungy Madison Avenue offices to bright new digs off Park Avenue, he assigned himself an office no larger than those of other key executives. And he's always available to make a sales call if Paul Murphy, who runs North American sales, thinks it will help. "Paul will tell me I have to call this customer at this time," Stahl tells employees at one point. "That day, I work for him."


The longtime Atlanta suburbanite also seems to be enjoying Manhattan. Stahl can walk to work across Central Park, he plays basketball at the local YMCA, and often eats out at neighborhood restaurants with his wife, Lynn. Stuck trying to find a taxi one rainy day, Stahl even ventured into one of the pedicabs that troll the city; now, he rides them regularly.

Still, when it comes right down to it, Stahl is in a tight spot. He has been feeling out investors who might put some money into the company, perhaps through a debt-for-equity swap that would finally ease the crushing debt burden. But that's unlikely to happen until Revlon has shown it can make money. "Great brands that are run effectively attract capital. They always have," he insists. That would be Stahl putting a pretty face on things.

By Gerry Khermouch in New York

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