CCA Industries inks outsourcing deal with the Emerson Group as part of restructuring
EAST RUTHERFORD, N.J. — CCA Industries, whose portfolio of health and beauty products includes Plus+White toothpastes and teeth whiteners, Bikini Zone medicated topical and shave gels, Nutra Nail nail care treatments and Gel Perfect UV-free gel color, is restructuring its operations and entering a partnership with sales and marketing company the Emerson Group
The company will outsource to Emerson certain sales and administrative functions. In addition, warehousing and shipping will be outsourced to and managed by OHL, a global supply chain management company. The company’s inventory will be moved to an OHL-managed facility in Indianapolis. According to CCA, a key benefit of the outsourcing move is that it shifts a substantial portion of the company’s current fixed costs into a variable cost structure moving forward, which can ultimately help keep expenses in better alignment with any future revenue generated by its brands.
This action could also potentially save the company more than $3.5 million in overhead expenses over the course of the first 12 months based on performance of its brands in fiscal 2014.
The company also announced that it is projecting a net loss for fiscal 2013 in excess of $6.1 million. As previously reported, the company lost momentum due to the unexpected passing of its prior CEO in the midst of a challenging retail environment and, as a result, revenue expected from its new product launches, in-store merchandising and expanded distribution efforts did not materialize as expected, the company stated. In addition, returns and inventory reserve costs resulting from a significant weakness seen in the nail color category, coupled with the less than expected consumer sales of its gel nail color brand introduced in fiscal 2011, also significantly exacerbated the company’s performance in fiscal 2013. CCA noted that it does not anticipate those substantial losses to continue.
“This outsourcing plan will permit our company to leverage the power of scale in all aspects of our sales, warehousing and logistics needs, resulting in significant operating efficiencies and expense reduction while continuing to direct all aspects of our business. Importantly, this restructuring will enable the company’s management team to substantially beef up its efforts to enhance our key brands’ connection to the consumer with extensive and cost-effective advertising and marketing strategies that emphasize the competitive strengths of our core products,” stated Richard Kornhauser, CEO and president of CCA.
Kornhauser added, “The Emerson Group could be an ideal partner with their strong market presence and significant credibility with our retail trade partners. We are looking forward to working closely with them and leveraging their strong retailer network to drive the company’s efforts to further enhance its position in-store, and expand its distribution base on both existing brands and new products. The Emerson Group currently manages approximately $1.7 billion in consumer sales, and they can be a key catalyst in our plans to grow CCA into a major consumer products company.”
Kornhauser estimates that the company will incur costs related to the restructure of approximately $300,000 in the first quarter of fiscal 2014, but with the outsourcing to Emerson, and its overall efforts, the company is expected to return to profitability during fiscal 2014. It expects to issue complete financial results for fiscal 2013 at the end of February.