Adore Beauty shares rise then fall as first-half sales jump 18pc

Online special event shopping days helped boost sales in the first half. The online beauty retailer also benefitted from multiple record trading days including Afterpay Day in August, and Cyber ​​Weekend in November.

COVID-19 lockdowns accelerated growth in new customers and returning customers to the website, which offers more than 200 global beauty brands from Aesop to American Crew to Coco & Eve.

Loyal customers

Ms O’Shannessy said returning customers were the key growth driver in the first half, growing 56 per cent on the prior period and delivering 71 per cent of the record revenue.

“These loyal returning customers become more valuable the longer they are with us, increasing their basket size and order frequency every year they spend on our platform,” she said.

The average order value was up 5.4 per cent to $106.70 in the first half ending December 31.

Sales revenue jumped 18 per cent to $113.1 million in the first half, boosted by the growth in active customers – those that have spent with the online retailer in the past 12 months – which increased 13 per cent in the current year to 875,597.

Sales slowed in the second quarter from the first-quarter rise of 25 per cent, which was underpinned by lockdowns and a structural shift to online.

Strong growth for fragrance

Customers are shifting away from cosmetics to skincare products during the pandemic, which has emphasized self-care and health while consumers spend more time at home.

Ms O’Shannessy said color cosmetics growth was still subdued because people were staying home more and wearing masks when going out, but sales should pick up as “things open up and people come back into the office.” Fragrance and Korean beauty products grew strongly over the half.

Earnings before interest, tax, depreciation, and amortisation fell 27 per cent to $3.8 million and the EBITDA margin was 3.3 per cent, in line with prior guidance, to maintain a 2 per cent to 4 per cent margin in the short to medium term. This guidance was reconfirmed on Tuesday.

Net profit after tax fell 22 per cent to $1.9 million, as marketing costs climbed. Marketing as a percentage of sales reached 14 per cent, but this was less than the inflation in the paid marketing channel across the industry over 2021, which was up about 45 per cent in paid cost per click.

Ms O’Shannessy said to battle this increase, Adore Beauty had over the past five years been investing in brand building and creating content such as podcasts, blogs and videos, as well as collaborating through co-funded marketing initiatives with brands.

Inventory levels increased in the half to support revenue growth and mitigate supply chain issues. Chief financial officer Stephanie Carroll said turnover remained in line with the prior corresponding period due to good stock management, but inventory was down $4.8 million in January.

Due to supply chain issues with packaging suppliers, Adore Beauty’s launch of its first private-label brand in skincare was pushed out to the June quarter from the March quarter.

Ms O’Shannessy skipped full-year issuing or sales guidance given the uncertainty around COVID-19.

UBS retail analysts said the result overall was better than expected, with second-quarter sales a touch ahead of its estimates for 4 per cent growth in quarter.

Jarden analysts told clients the result and trading update should give investors confidence that Adore Beauty can increase revenue even when bricks and mortar competitors are open for business.

Adore Beauty floated to much hype in October 2020 at $6.75 per share out of Quadrant Private Equity, which still owns 32.5 per cent. Investors are substantially underwater.

On Tuesday, the stock initially gained but by lunchtime it fell 8.5 per cent to $2.47 a share.

There has been plenty of drama since then – including last year when chairman and Quadrant staffer Justin Ryan left the business to set up a new private equity firm with Adore Beauty founder Kate Morris.

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