It seems that artist branded perfumes have seen their heyday and Elizabeth Arden is no exception. It’s not just the lace of interest from consumers, but the amount of money that is invested into a star-studded perfume line. When the company announced their quarterly earnings result in February of 2016, it was rife with decline and missed the consensus on all fronts. The estimate of $0.60 per share was met with an apologetic $0.10 per share while revenue estimates came back over $28 million short causing investors worry in the disappointing results.
Elizabeth Arden may still have a fighting chance though as Revlon Inc. moves forward in acquiring the company for $419 million. However, this is a wager in and of itself to unit two aging cosmetic giants in hopes of reinvigorating both the brands. The risk is high as Revlon has admitted to the transaction representing a 50% premium over Elizabeth Arden’s closing price on shares. “The $14-a-share deal values Elizabeth Arden at about $870 million when the debt is included.
Billionaire Ron Perelman, who controls Revlon, knows that he is acquiring an unprofitable company whose celebrity fragrances have lost desire with consumers. Yet Perelman still sees an opportunity to revive the fortunes of the 106 year old Elizabeth Arden business. Revlon has been hanging on for 84 years and hopes that the combined distribution network as well as marketing strategies can broaden their appeal. “We see great opportunities for growth where they are strong and we are not,” stated Revlon CEO Fabian Garcia.
Revlon has had its own issues though and are pouring not only a lot of their own money into the merger, but that of investors who have been struggling with remaining patient. There were rumors that Revlon itself was to be bought out, but was put to rest when Garcia was named CEO after Lorenzo Delpani stepped down. Both companies have struggled with the shift to e-commerce as well, with Revlon having a small lead in that game.