Amidst rising living costs and changing consumer preferences, one thing remains constant: people’s unwavering commitment to their beauty and personal care. Despite economic shifts, the desire to look and feel good stands strong as the charm of beauty products remains steadfast, a fact that has carried the performance of Adore Beauty (ASX: ABY).
Guided by new CEO Tamalin Morton, who stepped into the role after founder Kate Morris vacated the seat in November 2022, the online beauty retailer recorded revenue of $180.6 million in FY23, down 9.6% on lockdown-impacted FY22.
$0.6m EBITDA was reported for the year, showing a slim earnings margin of 0.4%. This reflects factors like reduced operational efficiency, rising costs, and investments in important projects. Adore Beauty’s performance improvement in the second half has improved gross profit margins, more efficient marketing, and better control over employee costs.
To counter missed sales due to inventory shortages, Adore Beauty is proactively investing in its inventory. The Company, with a robust cash balance of $27.8m as of 30 June 2023 and debt-free, prioritised inventory for high-demand products. This has boosted sales whilst posing minimal inventory risks.
Furthermore, a three-year revenue CAGR of 14% was observed, and positive sales momentum continues into FY24 with year-to-date (comparison of 1 July to 15 August 2023) revenue up 5.9% on the previous year.
Commenting on the Company’s FY23 performance, Morton said, “Adore Beauty returned to growth in the second half despite challenging trading conditions, demonstrating our compelling customer value proposition and the underlying strength of our business.
“Adore Beauty’s strategic growth initiatives continue to mature with mobile app sales accounting for a quarter of all revenue in Q4 FY23. We see further opportunities to increase revenue contribution from the app and are investing in AI, beauty technology and user experience enhancements to support decision making and conversion.”
Morton also revealed that strong engagement and sales from loyalty members reinforce the underlying trust in the brand and strength of the business. While there was an 8% decrease in active customers compared to the previous year, this decline was offset by a 4% increase in returning customers, reaching a new peak of 490,000. These returning customers accounted for a substantial 76% of the total revenue.
The Company is looking at stepping up its owned brand portfolio to improve margins over the long-term, having increased the count of private label Stock Keeping Units (SKUs) to 38 in FY23 across the AB Lab, Adore Beauty and Viviology brands, more than tripling its previous number. Ongoing strategies are in place to continue expanding this range even further and Adore Beauty is open to further Merger & Acquisition (M&A) opportunities.
Morton added, “New strategic initiatives already underway provide short and long-term growth levers, and include leveraging new data insights to enhance our product offering and loyalty program, real-life activations and audience expansion initiatives.”
Elevating brand awareness is a core goal for the Company in FY24, especially targeting women aged 41 to 50. One approach is enhancing organic traffic through customer education on Adore Beauty’s platforms, driving positive brand recognition. Additionally, the Company plans to hold several promotional events throughout the year in collaboration with partnering brands to bolster sales in the face of inflationary challenges.
Notably, the Company’s brand awareness witnessed a 3% rise in the 25-45 female demographic during the year, along with an impressive 7% growth in the 45-65 female segment.
Adore Beauty’s share price went up by 7.5% after the Company released the FY23 results, from $1.02 per share on 23 August 2023 opening, to $1.08 per share as of 1.30pm AEST.
Clara is a Business Reporter for The Sentiment.
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