It's the world's largest cosmetics company. So why is it leaving the world's largest country? It may be a very smart move, says one strategist.
The world's largest cosmetics company is leaving the world's most populous country.
Revlon has announced that it will be closing its operations in mainland China. Revlon expects to save $11 million annually by leaving the People's Republic after the company takes a $22 million restructuring hit on its income statements. China was responsible for only 2% of the makeup giant's $1.4 billion annual revenues.
Shareholders reacted positively to the news, with Revlon's stock up nearly 1.5% on the closing day of the year. For 2013, Revlon is up nearly 72%.
(Read more: Cosmetics maker Revlon to exit China)
CNBC contributor Gina Sanchez, founder of Chantico Global, believes this latest exit is part of its overall strategy.
"I think this is consistent with several moves that they've made," says Sanchez. "They've made a number of changes over the last couple of years."
Sanchez cites the company's top management replacements, simplification of share class structure, and $660 million acquisition of salon-care products maker Colomer Group back in August, as examples of large changes at the company.
"The shutting down of Revlon China really is a part of cost-cutting efforts," says Sanchez, who sees this as a very positive move by the company.
"Revlon has had kind of an interesting history where they really haven't been a top performer," says Sanchez. "But, I think that Ron Perlman is hell-bent on seeing the company continue to grow. From where they're trading right now at about $24, I think that they probably could go up to about $29 based on a lot of what's been happening."
(Read: CNBC business news)
CNBC contributor Andrew Busch, editor and publisher of The Busch Update, is less bullish based on the price action shown on Revlon's charts.
"Revlon is a very volatile stock. I'm a pattern guy," says Busch. He says that over the past year, the stock has had gone up, but in a step-like fashion. It has gone up a couple times and retraced about 50% of the rallies each time, he notes. This most recent time, however, it has failed to do so. "On the last bit, we rally [and] put in a new high at $29 but we've sold off more than 50%," says Busch. "That's where we kind of stand at $24 here on this last move."
"The 10-day is now below the 30-day, indicating further weakness for Revlon," says Busch. "But, this is a really volatile stock. I don't like this trading pattern. It's really hard to make money on this thing if you're trading it medium-term or even short-term."
"Just be really careful," warns Busch. "Right now, I expect some downside pressure. If you get a close below $24, I would sell it and look for a little bit more downside, maybe below $20."
To see the rest of Sanchez' fundamental analysis and Busch's technical analysis on Revlon, watch the video above.
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