While many of us are on a constant lookout for a beauty routine that rejuvenates both beauty and wellness, some may wonder if this focus on aesthetics improves lifestyle or simply a passing trend? Adore Beauty (ASX: ABY), a leading Australian online beauty retailer, is betting on the former with a $25 million all-cash acquisition of iKOU, a premium beauty brand.

iKOU was established in 2007 across the Blue Mountains and has a loyal customer base. Their diverse range of products exceeds 300 SKUs across skincare, bath and body, home fragrance, and more. Moreover, iKOU’s focus on organic, Australian-made, and cruelty-free products aligns perfectly with the growing “clean beauty” trend.

Adore Beauty CEO Tamalin Morton said, “iKOU complements and strengthens our existing business, delivering revenue growth and margin expansion, as well as supporting private label and physical store initiatives.”

With iKOU’s projected FY24 revenue of $8.1 million and EBITDA of $2.0 million translating to EPS accretion from the first year, the shared revenue is projected to be EPS accretive for Adore Beauty starting in FY25, despite economic shifts and inflation. 

“The brand’s extensive product range accelerates private label share of revenue, improves our margin profile, and provides our first store footprint across three premium locations,” Tamalin further added. 

The deal structure involves a total cash payment of $25 million: $20 million upfront and an additional $5 million paid 18 months after completion. iKOU will be acquired on a debt-free and cash-free basis with normal working capital levels, with the entire acquisition funded through Adore Beauty’s strong balance sheet. The acquisition is anticipated to be finalised on July 31, 2024.

For the Half Year ended December 31, Adore bucked a retail trend of declining revenue by reporting a 7% increase to $100.7 million compared to the previous corresponding period. This flowed down as $2.4 million in EBITDA while maintaining $32.4 million of cash, largely what is funding this iKOU acquisition. 

Adore classified 81% of its sales as coming from ‘loyal customers’ 

At present iKOU’s clean beauty products are only available through its three retail boutiques in the Blue Mountains, Sydney, and Byron Bay a direct-to-consumer website, and via wholesale distribution agreements with retail stockists and luxury spas. 

According to iKOU’s website, a 500ml bottle of De-Stress Organic Hand & Body Lotion 500ml will set a customer back $60 plus shipping fees.