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Why Revlon Stock Plunged 45% in 2020

By Demitri Kalogeropoulos - Jan 4, 2021 at 9:27AM

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The pandemic added pressure to an already struggling business.

What happened

Revlon ( REV 4.53% ) shareholders suffered significant losses last year. Their stock dropped 45% in 2020, compared to the 16% increase logged by the S&P 500, according to data provided by S&P Global Market Intelligence.

That result isn't good, but the 2020 returns could have been much worse, given that the stock lost over 80% of its value through early November.

A young woman applying makeup.

Image source: Getty Images.

So what

The COVID-19 pandemic had a major impact on the makeup-specialist's business by pushing sales lower and forcing an aggressive cost-cutting and restructuring effort. Revenue dove 29% in the first half of 2020, and operating losses ballooned to $245 million from $33 million a year earlier. Revlon's operations were under pressure before the pandemic struck, but a sustained shift away from makeup demand pushed investor sentiment even lower.

Now what

Revlon ended the year with some positive news that suggested it had plenty of time before its large debt burden pushed it toward bankruptcy. Its third-quarter results showed a modest improvement in sales trends, too, with revenue falling 20%, compared to the prior-quarter's 39% slump. Still, investors should stay cautious about this value stock due to its weak growth prospects, heavy debt load, and uncertain profit outlook.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Revlon, Inc. Stock Quote
Revlon, Inc.
REV
$11.53 (4.53%) $0.50

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