Having underperformed after a recent merger, Columbia-based Cosmetic Center Inc. yesterday said it has hired a noted turnaround specialist to make it attractive to suitors after its parent company said it would sell its majority stake in the cosmetic and personal care products retailer.
Betsy Burton, formerly of Supercuts Inc. and PIP Printing, and most recently founder of her own retail investment company, yesterday was named Cosmetic Center's president and chief executive, replacing I. Howard Diener.
Revlon Inc., the biggest U.S. maker of mass-market cosmetics, acquired an 85 percent interest in Cosmetic Center in April 1997 in return for Prestige Fragrance & Cosmetics Inc. retail chain, a wholly owned subsidiary.
At that time, Revlon officials said they wanted to withdraw from operating retail stores and focus on cosmetics.
In response to the planned divestment by Revlon, Cosmetic Center said it would seek a buyer or investors. Cosmetic Center operates 60 retail and 190 outlet stores, principally in the mid-Atlantic region and Chicago.
Jerry W. Levin, chairman of Revlon and Cosmetic Center said in a statement: "We are disappointed in the financial results and the progress that we have made to date in integrating Cosmetic Center with Prestige Fragrance & Cosmetics.
"Our original strategy of combining these companies is sound. Cosmetic Center is moving immediately and aggressively to address the issues that have negatively affected its performance."
Revlon said it expects to take a charge of up to $15 million in the second quarter related to the disposition of Cosmetic Center.
For the first quarter, which ended March 28, Cosmetic Center lost $5.78 million, or 58 cents per share, compared with a loss of $2.83 million, or 33 cents per share, in the first quarter of 1997.
"The Cosmetic Center hasn't met expectations, and maybe Betsy Burton is the right individual to turn it around," said Mark Millman, president of Millman Search Group, a Lutherville-based retail consultant firm.
"With Revlon pulling the plug, the business at hand is to nurture the company so it can stand alone, or go on the market looking for other opportunities," he said.
Cosmetic Center also unveiled a new growth plan that includes developing a new store prototype that will "provide our customers a more glamorous shopping experience," Levin said.
Model stores should open by early fall, he added in his statement.
The Cosmetic Center will replace its warehouse-type stores with something smaller and more intimate, said Marc R. Shiffman, vice president of business development.
In addition to hiring Burton, the company has named four new vice presidents, all former Revlon executives, said Shiffman, who is one of the new officers.
The others are: Steven R. Isko, senior vice president and general counsel; Robin Esterson, vice president of business operations; and Maxine Schwartz, vice president of strategic development.
Burton, 46, has more than 20 years of experience with retail and service companies.
Since 1992, Burton served as chairman and chief executive of BB Capital Inc., a financial company she founded and operated that invests in small to medium-size retail or service companies that have the potential to become large and national in scope.
Prior to that, she was the chairman and chief executive of PIP Printing, a business printer franchise company from 1991 to 1992. From 1987 to 1991, Burton held the same positions at Supercuts Inc., a nationwide hair care franchise operation. From 1984 to 1987, Burton was president and chief executive of another health and beauty aids company, Victory Beauty Systems.
Revlon also said that it bought closely held A. P. Products Ltd., a maker of ethnic hair-care products such as African Pride, All-Ways Natural and 911. Terms were not disclosed. Shares in Revlon rose 68.75 cents to $53.8125.
Pub Date: 6/09/98