Revlon Files Bankruptcy

What is your favorite summertime beverage

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Revlon was founded in 1932 by the Revson brothers and their chemist, Charles Lachman (that is the L in Revlon) during the height of the great depression. Their signature product was nail polish. Lachman’s brilliancy was using a pigment instead of a dye and they invented nail enamel. It became an instant success and later on they expanded to lipstick. At one point, Revlon was the #2 makeup brand in the world. After the war, they bought a German implement company that was seized by the government and that is how they got into the implement business.

Then 1985 came and the beginning of the end of Revlon began. That is when Ron Perelman bought the company and saddled with with $2.7B in debt. Then over the years he made some poor acquisitions. He paid $660M for the Colomer Group which included the American Crew and Creative Nail Design brands. Then he paid $870M for Elizabeth Arden in 2016. What is interesting about these acquisitions: Revlon bought Jean Nate in 1935 (remember that brand, it was hot for so many years). From its roots, Perelman thought it best to expand its nail polish and fragrance offerings and always used debt.

Fast forward to now and guess what? Revlon blames its conditions on supply chain, inflation, the war, and other factors. But the bottom line is that is still has more than $3B in debt, slightly more than in 1985. Debt killed the company and Perelman killed a company 90 years old. Now the company is nearly worthless valued a little over $100M. How much do you think Colomer Group and Arden are worth now?

Reliance Industries, a huge energy outfit in India wants to get into the beauty game and is thinking about buying Revlon. Revlon stock zoomed up on the news. But once Reliance does its due diligence and finds out what the brands are really worth, they would be best to walk away. Sure the brands are a steal at these prices but when the last time anyone bought a bottle of Revlon nail polish?

On a side note, I wonder how KKR is doing with OPI. With inflation at 8.5% and supply chain issues still going on, why is OPI discounting its core offering 25%? And just last Friday, SBH (Sally) got downgraded because its low income consumers will cut back on purchasing and the analyst specifically mentioned the manicure category. The stock sunk to just over $11 a share.

Meanwhile, the entire nail category accounts for less than 2% of overall beauty sales. It was always a niche category and always will be. Those that try to make it anything else always get stung in the end.

Out Of My Mind On A Monday Mornin’

What are you most concerned about now?

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On the subject of gasoline. I took a photo of my local gas station this past weekend advertising unleaded for $5.39, an all-time high. Then I read the Wall Street Journal and read that $6.50 by late summer is expected. It rattled off all the reasons why with the Ukraine war at the top of the list and the ban of Russian oil second. Most revealing in the article however was that these prices are likely to stay long term unless there is a severe recession. As you may know, the price of gas in Europe and virtually all other countries has always been 50% higher than the States. For some reason (yes, we do produce quite a bit ourselves), we have had the lowest prices. Today the price of gas in the UK is $8.20.

Then again, one Latte at Starbucks is $6.00 now.

Which got me to thinking. We were out to lunch at J. Alexander’s and I ordered the homemade veggie burger and fresh broccoli. The patty was homemade with more than 10 ingredients, fresh bun, all the condiments and add the broccoli prep and serving. My wife ordered a glass of white wine and her entrée. The server brought the bill and the glass of white wine ($16) was more than my entrée. Now think about it. The wine cost no more than $4 and took 10 seconds to pour. My meal took more than an hour in prepping, cooking, serving plus the cost of ingredients.

Food inflation really is here. I was at my favorite food market and a pack of spinach was $4.99, peaches were $3.99# and avocados were $2.49.

Biden is finally talking about removing the Trump tariffs on most items with the exception of steel and aluminum (although we don’t make foil sheets in the USA). Then again, Biden is talking about buying Iranian oil. Only one thing is certain right now, the Dem’s will get clobbered in November and it’s all on Biden.

How long is it going to take for the gas stations to start accepting more than $100.00 at the pump? Now we have to insert our credit card twice to get a fill-up.

Recession on the way? Not if you have traveled recently. TSA airport visits now exceed 2019, airfares are up more than 50%, hotel rates 60% and don’t even think about renting a car.

And what’s a blog without a little advertising? This time it’s our new ForPro foil sheet collection. The Expert sheets are dimpled oh so nice and the VIVID collection sings color, love the Rose and Celestial colors. Who said foil sheets have to be boring?

ForPro Expert Embossed Foil Sheets 500S 5" x 10.75" Pop-Up Dispenser 500 sheets

VIVID Rose Embossed Foil Sheets 5" x 10.75" Pop-Up Dispenser 500 sheets

VIVID Celestial Embossed Foil Sheets 5" x 10.75" Pop-Up Dispenser 500 sheets

Another lost spring in the Midwest. Cool temperatures, rain and lack of sunshine. Just like last year. Then again, we could be like India where temperatures are in the triple digits daily and it is so hot, birds are falling out of the sky dying. Farmers are closed down and with the Ukraine war now past 100 days with no signs of ending, a loaf of bread continues to track a gallon of gas.

Have you been to Total Wine yet? If you like wine and spirits, this is the place for you. Not only is it so much fun to shop, the prices are typically 10-25% less than other stores. My new favorite: The Pessimist red blend for $17 and change. Compare to other wines in the $30-$40 and this is better. But if you are looking for single malts, forget it. I have never seen such a shortage like this before.

Happy Monday, cheers!

Out Of My Mind On A Wednesday Mornin’

DeSantis or Trump in 2024?

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Cosmoprof North America show is only a couple months away and less than 50% of the booths are sold. Most of the “exclusive” areas like natural, CBD and others are empty. None of the major hair or nail companies are exhibiting. Can anyone tell me why the show is still going on and who will possibly attend? Cosmoprof is a true indicator of the professional beauty market and its demise. This show used to be held twice annually due to demand, new manufacturer’s entering the space, new distributors excited to sell to salons and overall growth of the industry.

What factors precipitated the demise of the pro beauty industry? I have been on this subject for a few years and it is so sad because this was once a vibrant and exciting industry. Why? It featured entrepreneurs eager to get their new products into the market; entrepreneurs went to beauty school to learn their craft whether it be hair, nails or spa and then went to open full-service salons; consumers eager to enjoy being pampered and spending time and money on beauty services and products.

Eager to cash in on the explosive growth was retailers. Diversion was already a big issue but never controlled as manufacturers loved the extra sales. Diversion was the first nail in the coffin. Then Sephora opened in 1998, Amazon Pro Beauty in 1999 and Ulta in 2000. This was the second nail in the coffin.

The third nail in the coffin was the manufacture rep groups, the same ones that called on distributors (and ironically still do). They saw the opportunity with the Big 3 and went after them. When this happened, diversion was no longer an issue for manufacturers, they went direct and controlled their products and prices. Who got screwed? Distributors and salons. Call it greed, call it whatever you want, bottom line, it’s business.

Fast forward to today and what is state of the pro beauty business? Most full-service salons are at 50-60% capacity due to the fact so many of their employees quit and moved to booth rental and even more recently due to the pandemic, work at home. Many salons have closed. Salons and spas are begging for nail techs and massage therapists. Spas that are open are only open for limited hours due to staffing issues. Salon retail is dead in the water. As I predicted long ago, services are what matters and demand for services, especially at the high end, are as good as ever.

Amazon shares are now on sale for less than $2500 a share and you don’t have to be a Prime member to buy them. What happened? They reported their slowest sales growth since 2001; Bezos bet a few billion on Rivian and that bet failed; supply chain and inflation issues; and overcapacity. However they are on track to crack $450 billion in sales this year and most likely $500 billion in 2023. Their cloud business is still soaring and their advertising unit is mostly all profits. If there is any company I would not bet against, it’s Amazon.

It’s time for a commercial break and here is one of our latest products that I love, love, love. ForPro Expert Reusable 100% Organic & Bamboo Cotton Pads are best in class and actually made with certified organic cotton. I did a bit of research and found that virtually all reusable cotton pads that claim to be organic are not. Same goes with cotton rounds. These are now available!

ForPro Expert Reusable 100% Organic & Bamboo Cotton Pads

I was at Kroger shopping and checking out baked Frito Lay chips and a Frito Lay stocker was in the aisle. I picked up the bag of chips for $3.99 and said to him that bag is so small, it’s like a snack bag now. He said to me, “July 1 we have another price increase coming” and he couldn’t tell me if the bag was going to get smaller. Brownberry bread is over $5.00 a loaf. Food inflation is here.

It’s no wonder large chain restaurants are doing well. In some instances, it’s cheaper to go out if you don’t order alcohol. Chains have buying power and are better at keeping employees. Alas, small restaurants and small chains are closing at a record pace and this is after they survived the pandemic.

If a Supreme Court document is leaked, is anything sacred and trustful anymore?

Trump is licking his chops after a couple nice primary wins. If you had your choice of Trump or DeSantis, who would you choose?

Have you thought about chartering a bus? Don’t! Here is another industry decimated by the pandemic. What once cost $3000/month to insure a bus is now more than $7,000/month. Diesel is more than $6/gallon but the real pain is that there are no bus drivers around. It’s not like Generation Z kids are graduating high school and bragging that they are going to be a bus driver. Average pay is $200/day regardless if the driver drives two, four or eight hours and some companies are paying $300 and over just to get drivers. But even at that, they can’t find them.

Happy Wednesday!

Out Of My Mind On A Wednesday Mornin’

What is your #1 concern right now?

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Where the f—k is the time going? Then again if you are living in Ukraine, each day is a painful reminder of the cost of freedom. It was February 24 when I wrote my special report and it has been five weeks they have been living in hell. I read the story of what happened to their country in 1932-1933, referred to as the Holodomer lead by then leader of Russia, Stalin. He starved to death 4 million Ukrainians, who to this day still never forgot. There is a movie about this called Bitter Harvest in case you want to learn more. Hopefully this war will end soon and with so many companies abandoning Russia, it will be interesting to see the outcome for the Russians.

How much longer is it going to take before the kid yells out, “The king has no clothes on!”. The pro beauty industry is long gone with the only remnants left of Cosmoprof and Salon Centric stores and a few full service distributors still peddling boutique brands that are trying to make a difference. America’s Beauty show next month doesn’t have a single A exhibitor in either the hair or nail care category. And how is Cosmoprof going to have a show in Vegas when there are no exhibitors left and attendees are as sparse as face masks in Florida? It’s no wonder that both Amazon and Ulta own the majority of the business now.

Back at the ranch (I have been watching too much Yellowstone which is totally addictive TV), new product launches are alive and well at TNG. I am very excited to launch our latest products from Ginger Lily Farms: Men’s 3-in-1 Shampoo, Conditioner & Body Wash (available in Energizing and Fragrance-Free)

GLFB Men's 3-In-1 Original Energizing Scent Gallon

And our long awaited Kid’s 3-in-1 Shampoo, Conditioner & Body Wash, Fragrance and Tear-Free!

GLFB Kid's 3-In-1 Fragrance Free Gallon

With all the stress, bullshit and anxiety going on these days, we all need a daily reset. What is better than a little meditation and time alone with our new ForPro Expert Rechargeable 6-in-1 Eye Massager! It offers genuine relief and includes heat, 3D massage, music, bluetooth, voice and sleep functions.

ForPro Expert Rechargeable 6-IN-1 Eye Massager (Heat, Bluetooth, Music, Voice, Sleep, 3D Massage)

One of our best-sellers is our Lavender 10-Minute Paraffin hand and foot treatments. Due to the popularity of our fragrance-free formulations, we just added fragrance-free for both the hand and feet treatments. Just launched, they are already hot sellers.

ForPro Fragrance-Free 10-minute Paraffin Hand Treatment

What happened to Starbucks? I remember the first Starbuck’s that opened in Vegas and loving it. This was well before they opened in Michigan. My go-to drink is a triple Grande dry cap, non-fat and extra-hot. Back then it was $2.45. Now it is $5.90 and that is if you can get it. The stores around here are constantly closed or open limited hours. Starbucks used to be the model for other restaurants and retailers to follow for employee engagement. Now they can’t only keep employees, those that are still around want to unionize. Poor Howard Shultz, Starbuck’s founder. He is back yet again as the interim CEO with a host of issues to solve.

Do we really need award shows on TV anymore?

The NFL came to its senses and will now allow both teams in overtime to get the ball. About time.

The FDA authorized yet another booster shot for adults 50 and over? Sorry, I’m not ready for it.

Inflation is the now the #1 worry for consumers, some 17% of American’s now say inflation is their #1 concern. Price of gas over $4.00 a gallon is right behind. COVID worries now barely register. It is amazing how what is on our mind changes so quickly. And why we still have to wear masks in federal facilities and planes is the $100 question no one has the answer to. Oh wait, Biden extended the mask requirement until April 17. And why do you ask? Biden himself doesn’t have an answer.

Last word on inflation, FCL (full container load) pricing is still over $20,000 after all the fees to Michigan. Yes lower than $25,000 we paid last year, but still more than 5x what we paid before the pandemic. Until the FCL fees go below $10K, we will see inflation well into 2023. Yikes!

Russia Invades Ukraine

SPECIAL REPORT

Today another chapter in the world history book begins.

If you woke up today and had your choice of reading the following headline, which one would you choose:

1) New Omicron variant found in Costa Rica proved to be more contagious and dangerous than the previous variant and cases are already seen in two states in the U.S.A.

2) Russia invades Ukraine

If you chose #2, you need to know more about history. And believe me, I am not an expert, I prefer to focus on making beauty products. But I am writing this special report because Vladimir Putin’s decision to invade Ukraine affects everything and everyone.

The World Is Connected Like Never Before

Why are there imports and exports? Why do we travel? Because every country in the world is unique and possesses its own natural resources. I go to Mexico in the winter because it is 80 and sunny while it is 20 and gray in Detroit. Speaking of Mexico, they grow avocados and most countries cannot. Same with poppies and why drugs are so prevalent. Every country has a specialty. Italy: Parmesan cheese, wine, olive oil; France: Bordeaux region; Africa: Diamonds; Middle East: Oil and so on. What does Russia have? Natural gas (and yes, plenty of vodka).

What doesn’t Europe have? Natural gas. Where does Europe buy its natural gas? Russia. Unlike crude oil that is shipped on freighters, natural gas must be sent via  tunnel. In fact, they were building a tunnel for this reason between Germany and Russia (Nord Stream 2) and now that is on hold. And it is winter. Which means more crude oil will be needed but supply has been constrained for many reasons (#1, #2 and #3 are all Biden related and why frackers in the U.S. will not expand production). Today crude oil exceeded $100 for the first time since 2014. What happened in 2014 you ask? Russia invaded Ukraine.

Inflation

Inflation is running at a 7.5% rate, highest since the Carter administration and already the FED is pondering how much to raise interest rates in March. Virtually every company has not only raised prices, but are raising them again. Mondelez which makes hundreds of brands like Oreos and Cadbury has already raised prices 6% and are doing another 6% shortly. Why? Commodities keep going up. Commodities are staples like wheat, flour, coffee, cocoa beans, soy beans, oil, metals (aluminum is approaching a record $3400 per ton). Putin’s decision today has sent nearly all commodities up 5% in one day.

What does that mean for inflation? You got that right.

Stock Markets

Most American’s are invested in stocks whether they own stocks, IRA, 401(k), pension, mutual fund, etc. The wealth effect since March 2020 has been incredible for the economy through 2021. However Biden’s spending has caused ripple effects that all American’s are feeling and one reason why there will be a massacre in the November elections. U-M does monthly consumer sentiment reports and January was among the worst.

Yesterday, stock markets entered correction phase (down more than 10% and the NASDAQ is down more than 20%). Today will be down another 3-4%. More importantly, the stock market prices stocks based on 6 months future economic activity so when the stock market goes down for an extended period of time, the future does not look good.

Trillions have been lost since the beginning of 2022. The wealth effect has evaporated. Now the FED has to deal with this and inflation. I would not want to be Jerome Powell. He has to make the most difficult decision next month: Raise interest rates to curb inflation OR keep them at zero to help stabilize the stock markets. He knows that his decision will decide whether our economy keeps on humming or sinks into a recession. With all the pain and suffering businesses have endured since March 2020, a recession would be a total disaster.

Vladimir Putin

I love reading about history. I prefer not be living it. Putin is not only a communist leader, he is a strategist. If you know anything about Russia’s history, then you can understand Putin’s decision to invade Ukraine. The Soviet Union used to be on the same level as the United States when it came to military power, space exploration, nuclear weapons and so much more. The Soviet Union collapsed in 1991. Putin took power in 2000. Since then, he has been waiting patiently for his opportunity to redeem Russia and make it a superpower like it used to be.

The question I ask myself is that if Trump was president, would Putin have invaded Ukraine? Biden is in the top percentile of weak presidents and virtually nothing he says gets done. That is another reason why China’s leader, Premier Xi Jinping, has not condemned Putin’s decision. In fact, they might be best buds. We saw Putin and Xi together at the Olympics’ opening ceremony.  Xi has his own ambitions too like taking over Taiwan and the South China Sea and has already constrained Hong Kong.

One thing Putin does not care about is retaliatory action by Biden and its allies. At least not today. Because all those sanctions are about economics. The ruble has collapsed in value. So what. Imports to Russia will be curtailed or stopped. So what. Bank accounts will be frozen. So what. Putin expects hardships for his people during war and his supporters will endure hardships for as long as it takes. Until there is a breaking point.

Putin claims he launched the invasion because of Russian federalists in Ukraine. Why he really went to war, only he knows. But one thing is for certain, he wants Eastern Ukraine because that is where the sea is and that is where the true power play comes in.

President Biden

I don’t have much to say about him except for this: What are you going to do Joe? Inflation will hit 10%, a gallon of gas will hit $4 and an apple will cost $2. What are you going to do Joe if sanctions don’t work? How long will the U.S. military stay on the sidelines? What are your allies going to do? Truth is, who would want to be in Joe’s position? Then again, he is the one that campaigned to be president and won. He must make the right choices.

Bottom Line

The entire world will feel the ramifications of this war. The Ukrainian people have endured so much. Since 2014 they have been on edge. Volodymyr Zelensky, Ukraine’s President and only 44 years old has done his best. He has tried to get Ukraine into NATO and included in the European Union, two more reasons why Putin made his decision. Zelensky is dependent on his allies which include the most powerful democratic nations in the world: The U.S., the U.K. and Europe. What are his allies going to do?

The next few weeks are critical. One thing is for certain, Xi is watching how this unfolds very carefully because he too, is a communist leader and a strategist. If he sees Biden being weak, he may take the opportunity to invoke war. This is why it is so important that this war is short. Putin wants respect and he will need to get it if the war will end quickly. Let’s not forget the Soviet Union was instrumental in ending World War II and one more reason why the world really is connected.