Aussies and discretionary spending have a love-hate relationship right now. Treating yourself to something nice can temporarily relieve the stress of ongoing financial pressures, but it’s often accompanied by a hint of guilt. Rising costs have hurt both consumers and businesses as they try to focus on strategies to stay afloat. For online beauty retailer Adore Beauty (ASX: ABY), the strategy has involved leveraging its loyal customers and the upcoming discount season.
In Q1 FY24, Adore Beauty delivered a revenue uptick of 4.7% on PCP, amounting to $47.5 million, despite challenging trading conditions. Revenue was supported by growth in active customers, successful loyalty and promotional activity, and a record 497k returning customers. Adore Beauty’s mobile app made up 26.5% of all sales for the period, up 1.9 percentage points from June 2023.
Adore Beauty CEO Tamalin Morton shared, “While trading conditions remain challenging, Adore Beauty has had a solid start to FY24, with both revenue and active customers up on the same period last year. Encouragingly, active customer numbers have now returned to growth, and we continue to see positive momentum with a comprehensive offering that provides real value-added benefits.”
Adore Beauty launched in 2000 in a Melbourne garage as an eCommerce marketplace for beauty products. Now, it has over 270 brands on the platform. However, like most lifestyle brands, the Company has been combatting inflationary pressures and weak consumer sentiment.
In FY23, its revenue declined by 9.6% to $180.6 million. More significantly, its earnings fell by 88%, from over $5 million to about $600k, due to softer sales and higher freight costs. The brand saw fewer new customers even as the number of returning customers remained flat. Its annual revenue per active customer declined as average order frequency dropped to two per year, offset by record average orders values of $111.60.
For FY24, Adore Beauty decided to focus on its loyalty programs, core customer categories and expanding its target demographic to females aged 41 to 50. Plus, it is eyeing growth for its mobile app, which made up 25% of the revenue in Q4 FY23, nearing the 30% target.
The Company continues to execute its refined growth strategy, launching a subscription service and onboarding in-demand consumer brands such as Nyx, Davines, Ralph Lauren, Viktor & Rolf, and Mugler. Adore Beauty’s ‘Subscribe and Save’ service is now available across 18 brands, including SkinCeuticals, Alpha H, Lancome, AB Lab, ELEVEN, Viviology and Ultra Violette, with automated six-to-12-week replenishment. Additional partner brands will be added over time.
Finally, in line with its long-term goals, Adore Beauty founders and executive directors Kate Morris and James Height stepped down from their part-time executive roles in May 2023. Both will remain on the Board as Non-Executive Directors.
While few things were adorable or beautiful about the year past, the Company believes that the coming quarter will be a “key trading period”, especially with the nearing silly season—Black Friday, Christmas sales and whatnot. Despite the ongoing cost of living pressures and weaker consumer sentiment, Adore Beauty says it’s on track to achieve an EBITDA margin of 2-4% in FY24.
Alinda is a Business Reporter for The Sentiment
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