ERP Implementation Failure at Revlon: IBS Center For Management Research

920-0034-1
IBS Center for Management Research
Purchased for use on the Mestrado em Economia da Empresa e da Estrategia - Inteligência de Negocios, at University of Oporto - Faculty of Economics.

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Adelaide Martins, from 22-Dec-2021 to 22-Jun-2022. Order ref F433833.
ERP Implementation Failure at Revlon
This case was written by Syeda Maseeha Qumer and Debapratim Purkayastha, IBS Hyderabad. It
was compiled from published sources, and is intended to be used as a basis for class discussion
rather than to illustrate either effective or ineffective handling of a management situation.
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I
© 2021, IBS Center for Management Research
IBS Center for Management Research (ICMR)

IFHE Campus, Donthanapally,
Sankarapally Road, Hyderabad-501 203,
Telangana, INDIA.
Ph: +91 9640901313
E-mail: casehelpdesk@ibsindia.org

Distributed by The Case Centre North America Rest of the world
www.thecasecentre.org t +1 781 239 5884 t +44 (0)1234 750903
case centre All rights reserved e info.usa@thecasecentre.org e info@thecasecentre.org
920-0034-1
ERP Implementation Failure at Revlon
“ERP problems, including implementation failures, are common. But an ERP
problem that results in an investor lawsuit is rare.”1
– Jim Johnson, founder and chairman, The Standish Group International
Inc., a research and consulting firm, in May 2019.
In 2019, global cosmetics giant Revlon, Inc. (Revlon) faced a series of class action lawsuits from its
investors over the planning and implementation of its new Enterprise Resource Planning system

(ERP) SAP S/4 HANAa. Four law firms had filed the class action suits based on the company’s
quarterly results with Revlon admitting that it had been unable to fulfil orders to the tune of US$64
million when one of its plants in North Carolina rolling out its first SAP go-live, experienced
shipping delays and lost sales due to production stoppages. According to the lawsuits, the company
made false or misleading statements and failed to disclose the extent of its issues with the SAP
implementation. The ERP related problems became known in March 2019 after Revlon reported that
difficulties in implementing the company’s new ERP system had disrupted its business operations
and caused a material weakness in the company’s internal control over financial reporting.
After acquiring prestige beauty company Elizabeth Arden, Inc.b (Elizabeth Arden) in 2016, Revlon
wanted to integrate its processes across business units. In early February 2018, it rolled out
SAPS/4 HANA for a large part of its North American business to integrate planning, sourcing,
manufacturing, distribution, and finance. However, the ERP changeover proved disastrous and
resulted in an initial slowing down of plant operations, which disrupted the manufacture of
finished goods and the fulfilment of orders to large retailers, thereby affecting sales. Revlon
admitted that it had identified a material weakness in its internal controls, primarily related to the
lack of design and maintenance of effective controls due to the implementation of the new ERP
system in the US. The disruption caused by the failure led to a net loss of US$294.2 million in
2018. In the words of Clinton Jones, a technical consultant, “What this story does tell, is a
cautionary tale for businesses embarking on digital transformation. One where the c-suite will be
held accountable for botched or failed initiatives. It is not clear what went wrong here but these
are often the result of poor executive sponsorship, weak project governance or over-ambitious
digital renewal plans that are not considered carefully enough for their impact.”2
While Revlon implemented a robust remediation plan and resolved the customer service level
disruptions resulting from the launch of the new ERP system, the questions before the senior
management at Revlon were: How could Revlon have lowered the risk of failure and related
damages? Going forward, how can it mitigate its exposure to inherent ERP implementation failure
risks? How can Revlon enhance its internal control environment and ensure that the system does
not materially disrupt its operations as it moves forward?

a
SAP S/4HANA is a next-generation, intelligent ERP business suite designed specifically for in-memory
computing by German multinational software corporation SAP SE. The ERP system allows companies to
perform transactions and analyze business data in real-time.
b
Founded in 1910, Elizabeth Arden, Inc. is a US-based prestige beauty company recognized globally for
its innovative beauty products, trendsetting makeup, and distinctive perfumes.
2
920-0034-1
BACKGROUND NOTE
Revlon was founded in 1932 by brothers Charles and Joseph Revson along with chemist Charles
Lachman. They introduced an opaque nail enamel that came in different shades and went on to
become very popular.
In 1955, Revlon began to expand globally and went public with its initial stock price at
US$12.The company also branched out into other types of beauty products including hair
coloring, face powder, and fragrance. In 1968, in partnership with designer Norman Norell, the
company launched Norell, America’s first designer fragrance, which grossed US$1 million in
sales in its first year.
In the 1960s, the company segmented its product line under: international glamor,
hypoallergenic, youthful, dry skin care, high-priced products, and affordable makeup. It also
diversified by acquiring companies in other categories such as shoe polish, toilet cleaners,
electric shavers, and pharmaceuticals. While the pharmaceutical acquisitions did well, many of
the other purchases tanked.

In 1973, Revlon launched a fragrance brand, Charlie, which became a hit in the 1970s. In 1975,
Charles Revson died and Michel Bergerac assumed leadership of Revlon.
The 1980s marked a period of transition for Revlon. In 1985, Revlon was purchased by Ronald
Perelman (Perelman) through his investment firm MacAndrews & Forbes. Perelman took Revlon
private again through a leveraged buyout, burdening the company with a US$2.9 billion debt load.
He then divested Revlon of many of its previous acquisitions. But by the mid-1980s, competition
from the Estée Lauder Companies Inc.c (Estée Lauder) and CoverGirld brands had eaten into
Revlon’s success.
By 1990, Revlon held only 11% of the US cosmetics market. The company was running into big
operating losses as it had to repay its debt, and this forced Perelman to sell off corporate assets to
make the payments. In 1992, Perelman tried to take the company public again, but the initial
public offering (IPO) failed miserably. In 1991, Jerry W Levin was appointed CEO of Revlon and
he managed to turn the company around. Another IPO in 1996 succeeded and Perelman retained
almost all the voting stock.
The millennium brought a bold new influence to Revlon. Renowned makeup artist Gucci Westman
joined the company as Global Artist Director in April 2015, pushing the brand to the forefront of
trend and fashion.
In 2013, under the leadership of senior VP and CIO of Revlon, David Giambruno (Giambruno), the
company implemented a new ERP system, Microsoft Dynamics AX, to unite the different businesses
operating in the company and get it to act as one unified organization. There were 50 different
business entities within Revlon and each one was running its own ERP system. Giambruno collapsed
21 separate ERP systems into just one – Microsoft Dynamics AX, with no customizations.
In March 2016, Revlon named Fabian Garcia (Garcia), a former Colgate-Palmolive Companye
executive, as president and CEO. In June, Revlon acquired Cutex International, the nail brand,
business, from beauty company Coty. Revlon also acquired the iconic Elizabeth Arden company

c
The Estée Lauder Companies Inc. is one of the world's leading manufacturers and marketers of quality
skin care, makeup, fragrance, and hair care products with a diverse portfolio of 25+ brands sold in
approximately 150 countries and territories as of June 2020.
d
CoverGirl is an American cosmetics brand. It was acquired by Procter & Gamble in 1989 and later
acquired by global beauty company Coty, Inc. in 2016.
e
Colgate-Palmolive Company is a US-based multinational that manufactures and distributes household
and cleaning products, dental, and other personal-care products.
3
920-0034-1
and its portfolio of brands, including its leading designer, heritage, and celebrity fragrances. In
May 2018, Debra G. Perelman, daughter of Perelman, who held nearly 86% of Revlon’s
outstanding shares, was appointed the first female CEO of Revlon.
As of 2019, Revlon was among the leading global beauty companies with some iconic and desired
products in cosmetics, skin care, hair care, hair color, and fragrances under brands such as Revlon,
Elizabeth Arden, Revlon ColorSilk, Revlon Professional, American Crew, Almay, Cutex,
Elizabeth Taylor, Christina Aguilera, Britney Spears, Juicy Couture, Curve, and John Varvatos. Its
diversified portfolio of brands was sold in approximately 150 countries globally. The company
operated through four reporting segments: Revlon; Elizabeth Arden; Portfolio; and Fragrances.
RESTRUCTURING AT REVLON
In June 2016, Revlon acquired Elizabeth Arden, Inc. for US$870 million, less than six months
after its largest shareholder, Perelman, was contemplating seeking strategic alternatives for Revlon
so that the company could compete better with deep-pocketed rivals such as Estée Lauder and
L’Oreal SAf.3 The acquisition was touted as an attempt to revive both the ailing beauty companies.

In the fourth quarter ended June 30, 2015, Elizabeth Arden reported a net loss of US$108.7 million
compared to US$155.9 million during the corresponding period of the previous year. Net sales fell
to US$175.5 million from US$191.7 million.4 Revlon’s revenues also declined by about 1.5% and
its profit fell by 5% in 2015 (See Exhibit I). For the first nine months of 2015, Revlon’s net sales
were US$1.39 billion, a 3% year-on-year decline. The company’s net income declined by 18%
during the same period to US$31.3 million.5 Though a significant part of this drop was attributed
to fluctuations in foreign currency, Revlon’s performance in both the professional and consumer
segments was not very strong.
Post the acquisition, both the companies were expected to benefit from the expanded category mix,
channel diversification, and broader geographic footprint. The deal was expected to expand
Revlon’s presence in categories such as skin care and fragrance, expand its presence in high-
growth markets including the Asia-Pacific region, and help refinance its heavy debt load.
In 2017, Garcia, the then CEO of Revlon, announced a major restructuring to leverage the power
of the company’s expanded brand portfolio and geographic footprint resulting from the acquisition
of Elizabeth Arden.
As part of the restructuring, Revlon announced a new organization structure and pivoted from
being a channel-based to a brand-centric organization. The new brand-centric structure was built
around four global brand groups – Revlon, Elizabeth Arden, Fragrances, and Portfolio Brands. In
order to better support the new structure, company functions including Finance, Human Resources,
Supply Chain, Research & Development, Legal, and Communications & Corporate Social
Responsibility, reorganized their departments. “This new brand-centric structure enables us to
leverage the strength of our iconic brands, better focus on and serve beauty consumers, and
quickly adapt to their changing behaviors and preferences. Aligned with our strategy, the new
brand-centric structure better positions us to grow and win across categories, channels and
geographies by delivering consistent, seamless and exceptional brand experiences, wherever and
however our consumers shop for beauty,”6 said Garcia.
Following the merger, Revlon began to execute the Elizabeth Arden restructuring and integration
program, which included consolidating administrative and sales offices, eliminating certain
duplicative functions, streamlining back-office support, and fully integrating the Elizabeth Arden
organization into the company’s business. The project’s integration-related restructuring activities
were estimated to cost between US$65 million and US$75 million by 2020, according to a filing

f
L’Oréal SA, headquartered in Paris, France, ís one of the leading cosmetic and personal care companies
in the world.
4
920-0034-1
with the US Securities and Exchange Commission (SEC).g,7 In the first quarter of 2017, Revlon
incurred Integration Restructuring Charges of US$1.1 million and non-restructuring integration
costs of US$16.9 million.8 The company was expected to realize between US$50 million and
US$60 in terms of synergies and cost reductions in 2017 in connection with the Arden integration.
Annual recurring synergies and cost reductions of approximately US$190 million were likely to be
generated over a multi-year period.9
ERP IMPLEMENTATION
As part of the restructuring, Revlon found itself needing to integrate its processes across business
units. Both the brands decided to streamline their operations and integrate their ERP. Elizabeth
Arden was an early adopter of Oracle Fusion Applicationsh while Revlon ran on Microsoft
Dynamics AXi. As most of Revlon’s acquired brands ran on SAP, the company decided to migrate
to a new ERP model SAP S/4HANA (See Exhibit II).
In February 2018, Revlon rolled out S/4HANA, a new ERP system, for a large part of its North
American business to integrate planning, sourcing, manufacturing, distribution, and finance.

Revlon COO, Christopher Peterson (Peterson), said that the beauty retailer had migrated to the
new ERP system to provide greater visibility to real-time transactional information that would
enable better and faster decision-making, improve customer service efficiency, and result in better
working capital management.
The new ERP system SAP S/4 HANA was designed to support new customer technologies and
processes and improve performance. It was meant to be the last major ERP implementation in
Revlon’s planning cycle. While Revlon implemented S/4HANA software in 22 countries, Elizabeth
Arden preferred not to go with SAP but to implement the ERP system of JD Edwards companyj
instead. However, ahead of the implementation of the new ERP, Revlon in its financial filing stated,
“This system implementation subjects the Company to substantial costs, the majority of which are
capital expenditures, and inherent risks associated with migrating from the Company’s legacy
systems. If the Company is unable to successfully plan, design or implement this new SAP ERP
system, in whole or in part, or experience unanticipated difficulties or delays in doing so, it could
have a material adverse effect on the Company’s business, prospects, results of operations, financial
condition and/or cash flows”10
ERP IMPLEMENTATION FAILURE
Revlon implemented the new ERP SAP S/4 HANA at its manufacturing plant in Oxford, Northern
Carolina, to integrate the planning processes of deliveries, search for suppliers, production, and
distribution and also financial transactions. Unfortunately, things took a wrong turn there.
Revlon’s acquisition of Elizabeth Arden, amid sinking profits and growing debt, proved a
challenge. The beauty retailer began to face some significant operational issues related to the
integration of the Elizabeth Arden brand. As outlined in its financial filings, it was facing trouble
integrating the operations, processes, and organizational structure with its newly acquired

g
The Securities and Exchange Commission (SEC) is an independent government agency responsible for
protecting investors, enforcing the federal securities laws, and regulating the securities industry, the
nation’s stock and options exchanges, and other electronic securities markets in the US.
h
Developed by Oracle Corporation, Oracle Fusion Applications is a suite of software applications built for
comprehensive business tasks such as enterprise resource planning (ERP), customer relationship
management (CRM), and human capital management (HCM).
i
Microsoft Dynamics AX, rebranded as Dynamics 365 for Finance and Operations, is an ERP software
solution developed by Microsoft Corporation. It helps global enterprises organize, automate, and
optimize their processes.
j
J.D. Edwards & Company, LLC develops, markets, and supports ERP software for managing the supply chain.
5
920-0034-1
company. Also, the cosmetic giant was struggling to stay relevant in a competitive beauty industry
as shoppers were migrating to specialty stores or buying their makeup and cosmetics online. In the
first quarter ended March 2017, Revlon posted an operating loss of US$42.5 million, compared to
operating income of US$35.8 million in the prior-year period. Net loss was US$37.4 million
compared to net income of US$11.0 million in the corresponding period of the previous year.11 In
the fourth quarter of 2017, Revlon’s net loss widened to as much as US$80 million, from US$36.5
million a year earlier. Sales slipped to US$785 million during the period, compared with US$801
million the year before.12
In January 2018, Garcia stepped down as CEO after less than two years in the position, causing a
further upheaval at the company, which was already reeling under losses and heavy debt. Board
member Paul Meister was named executive vice chairman and put in charge of the company’s day-
to-day operations on an interim basis. “This has been a difficult year for us balancing the
successful integration of Elizabeth Arden with the rise of e-commerce and specialty beauty stores.
We are aggressively catching up to that rapid transformation and I want to thank Fabian for his
leadership through this challenging and dynamic period,”13 said Perelman.

In a quarterly call in March of 2019, Revlon said that it would be late in filing its 2018 annual

report because it was facing trouble with a new ERP software system in the US. According to
Revlon’s Q4 2018 call held in May 2019, the company disclosed that it had identified a material
weakness in its internal control over financial reporting as of year-end 2018, which related
primarily to the lack of design and maintenance of effective controls resulting from the
implementation of its new ERP system in the US. Reportedly the Oxford manufacturing plant,
where the company rolled out its first SAP go-live, experienced shipping delays and lost sales due
to production stoppages. Revlon failed to fulfil US$64 million in orders due to issues related to the
SAP. “In early February [2018], we rolled out SAP for a large part of our North American
business to integrate planning, sourcing, manufacturing, distribution and finance. However, we
experienced issues during the SAP changeover that caused the plant to ramp up capacity slower
than anticipated,”14 said Peterson.
Thereafter, Revlon’s management assessed the effectiveness of the company’s internal control over
financial reporting as of December 31, 2018, and identified certain deficiencies. The management
concluded that Revlon had not carried out an effective continuous risk assessment process to
adequately identify and assess the risks and this had affected its internal controls over financial
reporting. They identified that Revlon had insufficiently controlled development processes and
implementation of the new software. According to them, the company did not maintain a sufficient
number of knowledgeable, trained personnel in the US operations impacted by the ERP system
implementation and in various other operations across the company who could be held accountable
for their assigned responsibilities for the design, implementation, and operation of internal controls
over financial reporting. Due to the dearth of such personnel, the company was unable to design,
implement, and consistently operate effective process-level controls to ensure that it appropriately
recorded and accounted for inventory, accounts receivable, net sales, and cost of goods sold.“For
starters, it does not seem as if Revlon understood either the size of the projects nor any of the risks
inherent in rolling out a new ERP software system. It doesn’t appear as if the cosmetics giant
developed any strategies to offset the possible risks. Complicating matters, the company was
encountering major problems integrating the Elizabeth Arden brand into its business. Rather than
focusing on getting the new ERP system up and running, it should have first addressed the
operational problems. Any ERP implementation is likely to fail under these circumstances,”15 noted
Henrico Dolfing (Dolfing), a project recovery consultant.
According to some analysts, Revlon’s new ERP platform SAP’s S/4HANA was not fully mature
and this had led to the ERP failure at the company. Since S/4HANA was first introduced in
February 2015, some major SAP consulting companies had ignored issues related to the product’s
immaturity and had begun promoting it as ready for implementation, they said. However, some
experts who specialized in ERP failure analysis, maintained that Revlon’s ERP problems were not
6
920-0034-1
related to S/4HANA’s maturity issues and that the company should have treated the move to
S/4HANA as a business transformation and not just a technical upgrade.16 According to them, the
conversion to S/4HANA was a complex and involved process with significant business and
technical challenges including maintaining business continuity. “You can’t just flip a switch and
have S4 running. It requires the articulation of a full vision—the design of processes and data, and
the subsequent deployment activities around testing and data conversion,”17 said Ranjit Rao, US
finance and enterprise performance leader at accounting firm Deloitte.
THE IMPACT
The ERP changeover proved disastrous for Revlon. The new ERP system disrupted the company’s
business operations and cu stomer service levels and had an adverse effect on its business,
prospects, results of operations, financial condition, and cash flows. Reportedly, the introduction
of the new system increased demands on its management team and staff, which diverted focus
from other corporate priorities.
Due to poor preparation and planning, the ERP switch resulted in an initial slowing down of plant

operations, disrupting the manufacture of finished goods and fulfillment of orders to several large
retailers in the US and resulting in millions of dollars in lost sales. Production capabilities and
inventory recovery were slower than expected, affecting the company’s order fulfilment service
levels. Revlon confessed that it was unable to fulfil orders to the tune of US$64 million because of
its inability to record and account for inventory. It estimated that the ERP related disruption had
led to approximately US$20million in lower net sales during the first quarter of 2018.
In addition to a breakdown in operational controls and production issues, Revlon also incurred
significant capital and operating expenditures, experienced difficulties in processing payments to
vendors, and was unable to fulfil federal, state, and local reporting and filing requirements in a
timely manner. According to Revlon’s CFO Victoria Dolan (Dolan), the company had spent an
additional US$32million in 2018 on operating activities compared to 2017. The company incurred
US$53.6 million of incremental charges on remediating the decline in customer services levels
(See Exhibit III).
In its Form 10-Q first quarter filing of March 31, 2019, Revlon stated that its net sales in the first
quarter of 2018 were negatively affected by service level disruptions that occurred at the
company’s Oxford manufacturing facility resulting from the launch of SAP S/4 HANA. For the
first quarter ended March 31, 2018, Revlon posted a net loss of US$90.3 million, compared to a
net loss US$37.4 million in Q1 2017, while net sales totalled US$560.7 million, down from
US$594.9 million in the corresponding period of the previous year.18 This decrease was also due in
part to the loss of certain licenses in 2017, as well as lower sales of licensed designer fragrances
from brands such as Juicy Couture and John Varvatos. Sales declines were particularly notable in
the company’s fragrance segment, as they fell 16% from US$108.8 million in Q1 2017 to US$91.4
million in Q1 2018.19
The company’s unaudited results for the fourth quarter 2018 showed a net loss for the seventh
straight quarter. Revlon reported that its fourth-quarter net loss in 2018 had widened to as much as
US$80 million, from US$36.5 million a year earlier. Sales slipped to US$785 million during the
period, compared to US$801 million in the corresponding period of the previous year. The
disruption caused by the failure to implement SAPS/4 HANA contributed to a net loss of
US$294.2 million in fiscal 2018, compared to US$183.2 million losses registered in 2017 (See
Exhibit IV and Exhibit V). Revlon attributed the loss to a drop in sales of all its business
categories, except Elizabeth Arden, partly caused by the breaks in service levels directly attributed
to the ERP implementation and also related to the re-acquisition of some rights connected to the
Arden brand. The company stated that it could not provide assurances that it would remedy the
ERP systems issues in time to fully recover sales and/or that the ERP implementation would not
continue to disrupt its operations and its ability to fulfil customer orders.
7
920-0034-1
Revlon’s stock price plummeted 6.4% on March 29, 2019, after the company announced that it
would be late filing its annual report for 2018 as it had identified a material weakness in its financial
reporting. This led to a series of class action lawsuits from investors against the company in 2019 as
they suffered significant losses and damages due to a decline in the market value of the company.
Four law firms namely BragarEagel & Squire, P.C., Wolf Haldenstein Adler Freeman & Herz LLP,
The Rosen Law Firm P.A., and The Zhang Law Firm, P.C. filed class action suits over Revlon’s
handling of the implementation of its ERP system. According to the claimants, the company had
made false or misleading statements and failed to disclose the extent of its issues with SAP
implementation. “The concern it seems is that the SAP issues were swept under the carpet and not
brought to light earlier. Accordingly, while the application may have been implemented correctly
and may have been doing exactly what it was supposed to do, and functioning normally, the
shareholders were unhappy with the way the Revlon business had communicated the challenges with
the implementation,”20 commented Clinton Jones, a tech consultant.
THE ROAD AHEAD

In March 2019, Revlon’s CFO Dolan said that the SAP ERP issues had been resolved and that the
Oxford plant was up and running in normal mode. She said that the company had developed a
robust service recovery plan and a remediation plan to address the issue and would continue to
enhance its internal control environment going forward (See Exhibit VI). Asked whether the ERP
disruption would carry through in the future, she said, “Our Oxford manufacturing facility is
currently operating under normal conditions, and SAP is not stopping us from producing what we
need to produce today. In fact, most of the pipelines around the world have been filled, and I’d like
to thank our customers and partners for their patience throughout 2018.”21
According to some analysts, Revlon’s ERP disruption problems might have been resolved, but the
class action lawsuits on behalf of investors represented a new ordeal for the company. They felt
that going forward, the senior Management at Revlon should understand the risks associated with
ERP transformations and implement an effective business plan to mitigate such risks. “It may be
tempting to blame the SAP software or whoever the system integrator was, but Revlon and others
should recognize that they ultimately have to own the results of these sorts of transformations.”22
observed Dolfing.
8
920-0034-1
Exhibit I:
Revlon: Statement of Operations
(in millions of US$ except per share amount)
Year Ended December 31,
2015 2014 2013 2012 2011
Net sales 1,914.3 1,941.0 1,494.7 1,396.4 1,347.5
Gross profit 1,246.5 1,272.7 949.6 902.6 866.3
Selling, general and administrative expenses 1,002.5 1,009.5 731.7 682.6 660.2
Acquisition and integration costs 8.0 6.4 25.4 - -
Restructuring charges and other, net 10.5 21.3 3.5 20.5 -
Goodwill impairment charge 9.7 - - - -

Operating income 215.8 235.5 189.0 199.5 206.1
Interest expense 83.3 84.4 73.8 79.1 84.9
Interest expense – preferred stock dividend. . - - 5.0 6.5 6.4
Amortization of debt issuance costs 5.7 5.5 5.2 5.3 5.3
Loss on early extinguishment of debt, net - 2.0 29.7 - 11.2

Foreign currency losses, net 15.7 25.0 3.7 2.8 4.7

Provision for income taxes 51.4 77.8 46.0 43.7 36.8
Income from continuing operations, net of 59.3 39.6 24.6 61.2 55.2
taxes
(Loss) income from discontinued operations, (3.2) 1.3 (30.4) (10.1) (1.8)
net of taxes
Net income (loss) 56.1 40.9 (5.8) 51.1 53.4
Basic income (loss) per common share:
Continuing operations 1.13 0.76 0.47 1.17 1.06
Discontinued operations (0.06) 0.02 (0.58) (0.19) (0.04)
Net income (loss) $1.07 $ 0.78 $(0.11) $0.98 $1.02
Diluted income (loss) per common share:
Continuing operations 1.13 0.76 0.47 1.17 1.06
Discontinued operations (0.06) 0.02 (0.58) (0.19) (0.04)
Net income (loss) $1.07 $ 0.78 $(0.11) $0.98 $ 1.02
Weighted average number of common shares
outstanding (in millions):
Basic 52.4 52.4 52.4 52.3 52.2
Diluted 52.6 52.4 52.4 52.4 52.3
Source: https://investors.revlon.com/static-files/7647dd48-df27-4ab7-b792-13a4b65bb308
9
920-0034-1
Exhibit II:
Microsoft Dynamics 365 Finance and Operations vs SAP S/4 HANA
Dynamics 365 Finance and
Capability SAP S/4 HANA
Operations
Cost Lowest cost Comparatively higher cost
Architecture Built from ground-up Built from ground-up
Payback period Shortest Longest
Scalability Easily scalable Comparatively easy to scale
Audience Medium and large businesses Medium to large businesses
Ease of use Exceptionally easy to use; Complex GUI; steep learning
very short learning curve. curve.

Implementation time Shortest implementation time. Comparatively short

implementation.
Customization Businesses can either In order to customize the
customize using in-house solution, organizations need
talent or choose from an to have deep knowledge of
extensive network of SAP’s traditional
experienced partners architecture and data models

Integration Can integrate seamlessly with Since SAP is built on niche

any Microsoft product with technology, integration with
backward compatibility as modern apps requires
well; adoption of a unique
Lots of flexible features mean integration path.
integration with third-party Integrates well with most
apps may not be necessary. third-party applications
meaning switching will be
more comfortable;
understanding SAP and all
its functions can take time.
Adapted from www.erpsoftwareblog.com
Exhibit III:
Revlon: Segment Profit and Operating Losses
(in millions of US$)
2019 2018 2017
Segment Net Sales:
Revlon $958.8 $998.3 $1,089.3
Elizabeth Arden 520.0 490.2 433.8
Portfolio 487.8 564.6 592.5
Fragrances 453.0 511.4 578.1
10
920-0034-1

2019 2018 2017
Total $2,419.6 $2,564.5 $2,693.7
Segment Profit:
Revlon $101.2 $129.6 $ 180.1
Elizabeth Arden 37.6 24.4 . 6.9
Portfolio 45.0 7.9 8.1
Fragrances 82.3 76.0 62.2
Total $ 266.1 $ 237.9 $ 257.3
Reconciliation:

Total Segment Profit $ 266.1 $ 237.9 $ 257.3
Less:
Depreciation and amortization 162.9 177.2 155.8
Non-cash stock compensation expense 8.1 17.2 6.8
Non-Operating items:
Restructuring and related charges 30.5 23.1 34.5
Acquisition and integration costs 3.9 13.9 52.9
(Gain) loss on divested assets (26.6) 20.1 -
Financial control remediation actions and related charges 13.4 - -
Excessive coupon redemption in dispute 13.2 - -
Oxford SAP disruption-related charges - 53.6 -
Elizabeth Arden 2016 Business Transformation Program - - 1.1
Elizabeth Arden inventory purchase accounting - - 17.2
adjustment, cost of sales
Impairment charge - 18.0 10.8
Deferred compensation - 2.0
Operating loss 60.7 (85.2) (23.8)
Less:
Interest Expense 196.6 176.6 149.8
Amortization of debt issuance costs 14.6 13.0 9.1
Foreign currency losses (gains), net (1.9) 15.8 (18.5)
Miscellaneous, net 16.4 1.3 (0.7)
Loss from continuing operations before income taxes $(165.0) $(291.9) $(163.5)
Source: https://investors.revlon.com/static-files/cd474abf-1179-4736-9445-a63967f5d35a
11
920-0034-1
Exhibit IV:
Revlon Key Financials
(in millions of US$ except per share data)
2019 2018 2017
Net Sales 2,419.6 2,564.5 2,693.7
Gross Profit 1,367.4 1,447.5 1,541.4
Gross Margin 56.5% 56.4% 57.2%
Operating (Loss)/Income 60.7 (85.2) (23.8)
Net Loss (157.7) (294.2) (183.2)
Diluted Loss per Common Share (3.11) (5.57) (3.48)

Source: https://investors.revlon.com/static-files/cd474abf-1179-4736-9445-a63967f5d35a
Exhibit V:
Revlon’s Revenue Growth (2016-2019)
Source: https://www.bloombergquint.com/
12
920-0034-1
Exhibit VI:
Revlon’s ERP Remediation Plan
To remediate material weakness, Revlon said that it would:
1. Implement enhancements to company-wide risk assessment processes;
2. Enhance the company’s review and sign-off procedures for IT implementation;
3. Train responsible staff and supplement staff;
4. Supplement internal resources with third-party consultants;
5. Enhance its process and control documentation;
6. Implement new processes and controls relative to the execution and oversight of inventory,
accounts receivable, net sales, and cost of goods sold;
7. Enhance and reinforce policies around account reconciliations and manual journal entries;
8. Clearly identify and communicate individual employee responsibilities; and
9. Implement controls and new reporting tools to ensure the completeness and accuracy of

information used in performing manual controls. The company also planned to continue to

evaluate additional controls and procedures that may be required to remediate the material
weakness.
Adapted fromhttps://www.rosenlegal.com/media/casestudy/1611_Revlon%20Complaint%20-%20Web.pdf
13
920-0034-1
End Notes:

1
Patrick Thibodeau, “Revlon SAP ERP Problems Result in Rare Investor Lawsuit,” https://searcherp.
techtarget.com, May 2019.
2
Clinton Jones, “When Revlon Changed ERP but Should Have Perhaps Settled for Simply Changing Its
Lipstick,” https://it.toolbox.com, June 2, 2019.
3
“How Might the Acquisition of Elizabeth Arden Help Revlon?” www.forbes.com, June 17, 2016.
4
Tomi Kilgore, “Elizabeth Arden Loss Narrows, But is Still Wider than Expected,” www.marketwatch.
com, August 6, 2015.
5
“How Did 2015 Look for Revlon?” www.forbes.com, December 28, 2015.
6
“Revlon Unveils a New Structure Designed to Drive Global Growth,” www.businesswire.com, January
17, 2017.
7
Allison Collins, “Revlon Restructures Following Elizabeth Arden Acquisition,” https://wwd.com,
January 3, 2017.
8
“Revlon Reports First Quarter 2017 Results,” www.businesswire.com, May 5, 2017.

9

“BRIEF-Revlon Reports Qtrly Loss per Share of $0.71,” https://in.reuters.com, May 5, 2017.
10
REV 10K - Revlon, Inc. - Annual Report - March 03, 2017
11
“Revlon Reports First Quarter 2017 Results,” www.revloninc.com, May 5, 2017.
12
“Revlon CEO Steps Down as Losses Mount at Cosmetics Company,” https://beautybusinessjournal.com,
January 30, 2018.
13
Chloe Aiello, “Revlon Says CEO Fabian Garcia Will Step Down,” www.cnbc.com, January 29, 2018.
14
Cliff Saran, “SAP Disruption Leads to Revlon Class Action Lawsuit,” www.computerweekly.com, May
31, 2019.
15
Henrico Dolfing, “Case Study 6: How Revlon Got Sued by its Own Shareholders Because of a Failed Sap
Implementation,” https://medium.com, August 8, 2019.
16
Shaun Snapp, “What Was the Real Story with the Revlon S/4HANA Failure?” www.brightworkresearch.
com, June 3, 2019.
17
John P. Mello Jr., “SAP S/4HANA App Migration: Lessons from the Trenches,” https://techbeacon.com,
June 17, 2020.
18
“Revlon Reports First Quarter 2018 Results,” https://investors.revlon.com, May 10, 2018.
19
“Revlon Reports First Quarter 2018 Results,” www.businesswire.com, May 10, 2018.
20
Clinton Jones, “When Revlon Changed ERP But Should Have Perhaps Settled for Simply Changing Its
Lipstick,” https://it.toolbox.com, June 2, 2019.
21
Cliff Saran, “SAP Disruption Leads to Revlon Class Action Lawsuit,” www.computerweekly.com, May
31, 2019.
22
Henrico Dolfing, “Case Study 6: How Revlon Got Sued by its Own Shareholders Because of a Failed Sap
Implementation,” https://medium.com, August 8, 2019.
14

ERP Implementation Failure at Revlon: IBS Center For Management Research

Uploaded by

Copyright:

Available Formats

ERP Implementation Failure at Revlon: IBS Center For Management Research

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ERP Implementation Failure at Revlon: IBS Center For Management Research

Uploaded by

Copyright:

Available Formats

920-0034-1

IBS Center for Management Research

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

© 2021, IBS Center for Management Research

IBS Center for Management Research (ICMR)