Revlon stresses the importance of a sustainable business in China amidst current uncertainty

Next month may see a group of new leaders taking up the government hot seats in Beijing; a change that could affect sales of luxury cosmetics and fragrances which are traditionally given as 'gifts' in the business world.

Uncertain situation​

But with a new government about to be assembled, the direction the government will want to take economically could prove pivotal to luxury cosmetic players in particular as many businesses may want to hold back on the practise of gifting until they have a clearer picture of which direction the government is going to take.

With growth in the China economy continuing to slow in the past year or so, on the back of falling international demand for China-made consumer products, all eyes will be on the ministry for economy to see what initiatives it might initiate in an attempt at reinvigorating the economy.

According to company president and CEO Alan T. Ennis, Revlon has seen the effects of this slowdown as its consumption has also been hindered.

Waiting game​

The leadership change has also meant that it is difficult for the company to forecast the future at present, so it will have to hold out and see what the new regime brings.

“We are focused on what we can do. [We know] the Chinese consumer is different. We’re very focused on continuing to ensure we have the appropriate product portfolio, and we remain very close with the retail partners there,”​ said Ennis on a conference call.

“The key is, it’s important to have a healthy and sustainable business in China. China is a large market with lots of distribution opportunity, but that's very different from pursuing a sustainable profitable business that is our main aim over time.”​

China down, APAC up​

In its third quarter result just released, Revlon’s net sales were lower in the quarter in terms of sell through in China, which has been on the decline, mirroring the economy.

However for Asia-Pacific on the whole, net sales in the third quarter of 2012 were $60.9 million, an increase of five percent compared to $58 million in the same period last year.

This was primarily due to higher net sales of Revlon color cosmetics in Japan and certain distributor territories, which were offset by the lower net sales of Revlon color cosmetics mentioned in China.

The New York-based firm posted a three percent growth in revenues overall to $347 million for the third quarter, with the Americas market making up for a hampered performance in Europe and the Middle East.