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Why Revlon Inc Stock Gained 15% in January

By Jeremy Bowman – Feb 5, 2017 at 10:24AM

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The cosmetics giant surged to start the year thanks to a new restructuring plan.

Two bottles of nail polish intersecting

Image source: Motley Fool.

What happened

Shares of Revlon, Inc. (REV 0.97%) surged last month after the company announced a restructuring plan. According to data from S&P Global Market Intelligence, the stock gained 15%. The bulk of the increase came in the middle of the month when the restructuring plan was announced.

So what 

The cosmetics giant, which has struggled in recent years, said it would restructure its brands into four separate divisions. The company said the new structure would help it meet its long-term growth aspirations, following the successful acquisition of Elizabeth Arden last September.

The brand-centric structure will be based around the Revlon, Elizabeth Arden, Fragrances, and Portfolio Brands divisions. CEO Fabian Garcia said the new model will "leverage the strength of our brands, and better focus on and serve our beauty customers." The stock jumped 7% the day the deal was announced.

Now what 

Revlon shares have been volatile in recent years as legacy cosmetic companies have struggled with the rise of competition from new store-based brands like Sephora, Mac, and Ulta. Elizabeth Arden, which it bought in September, saw its value significantly erode, and Procter & Gamble recently sold its Cover Girl line to Coty.

Wall Street often cheers restructuring plans, and it makes sense to do one after an acquisition like Elizabeth Arden. We will learn more when Revlon reports earnings later this month.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ulta Salon, Cosmetics and Fragrance. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Revlon, Inc. Stock Quote
Revlon, Inc.
$5.18 (0.97%) $0.05
The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
$126.25 (-1.90%) $-2.45

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