Revlon Inc. said yesterday that it has sold its 85 percent interest in the Cosmetic Center Inc., the Columbia-based cosmetic retailer, to a partnership controlled by a New Jersey-based investment and management company.
Revlon sold almost 8.5 million shares of the Cosmetic Center's Class C common stock and an unspecified amount of debt to Prestige Holdings I, which is controlled by York Management Services Inc. in Somerset, N.J.
Mark Millman, president of retail consulting firm Millman Search Group in Lutherville, said the deal gives the Cosmetic Center the financing and expertise to turn around its business. "Revlon didn't have the retail expertise," he said. "They're not retailers."
Cosmetic Center shares closed yesterday at $1.8125, up 75 cents. Revlon shares fell 75 cents to $16.25.
Revlon's divestment of its stake in the Cosmetic Center was no surprise, since the New York-based cosmetics giant said in June that it wanted to sell the retail chain and focus on its own business. Revlon will take a fourth-quarter charge of about $33 million related to the sale.
In York Management Services, which is headed by William F. Taggart, the Cosmetic Center is getting an owner with experience in turning around several retail companies, including Kmart Canada and Pic 'n Pay Stores.
"York believes the company can be successfully turned around and run as a profitable business," said Wendi Kopsick, a spokeswoman for York Management and the Cosmetic Center.
The Cosmetic Center, a specialty retailer of brand-name cosmetic, fragrance, skin care, hair and personal care products, operates about 60 retail and 193 outlet stores -- under its own name and that of Prestige Fragrance & Cosmetics.
The company, which merged last year with Revlon, reported a loss of $4.85 million on sales of $159 million for 1997. The Cosmetic Center has not had a profitable quarter this year. The company reported a third-quarter operating loss of $3.4 million, or 33 cents a share.
Betsy Burton, a turnaround specialist, became the company's president and chief executive officer in June. The next month, the company announced plans to close seven poorly performing stores, open eight others and revamp some to give them a higher-end look.
Yesterday, the Cosmetic Center also said it had obtained a $70 )) million secured credit line from BankBoston and Congress Financial, which will give it more favorable terms than a credit line due to expire in April.
Burton will continue to work on the turnaround with the company's new owner. "The Cosmetic Center's new ownership and credit facility are significant events for the company as we work to effect a turnaround of the business," she said. "We are pleased that we will have enhanced financial resources available to us and are confident that York Management's extensive retail experience will bring added value to the company."
The Cosmetic Center, which has cut about 15 workers and eliminated several other unfilled jobs, employs about 250 at its Columbia headquarters. Kopsick, the company's spokeswoman, said there are no specific plans for additional cuts.
Millman said the Cosmetic Center's new ownership gives it the chance to grow by merging with other companies. He expects several struggling regional companies to be available for sale after the holiday season. Prospects include H2O, Perfumania, Garden Botanica and Cosmetics Plus.
Pub Date: 12/12/98