Adore Beauty acquires Blue Mountains wellness brand iKOU for $25m

Adore Beauty acquires Blue Mountains wellness brand iKOU for $25m

Pureplay online beauty retailer Adore Beauty (ASX: ABY) has announced today it will acquire Blue Mountains-based organic beauty and wellness brand iKOU in an all-cash deal worth $25 million.

Founded in 2007 by husband-and-wife duo Naomi and Paul Whitfeld, iKOU began in the couple’s kitchen and has since grown into a brand with more than 300 stock keeping units (SKUs) across organic, bath and body, home fragrance, herbal tea and lifestyle accessories.

The company’s vegan and cruelty-free range is available in three retail boutiques in the Blue Mountains, Sydney’s QVB, and Byron Bay. iKOU also operates an online site and can be found in hotel and resort spas via partnerships with the Park Hyatt Sydney, The Langham and EOS Skycity.

According to Adore Beauty, the brand is debt-free and is forecast to generate $8.1 million in revenue and $2 million in EBDITA in FY24.

Under the agreement, Adore Beauty will pay $20 million upfront plus an additional $5 million 18 months post-completion. This represents about three-quarters of the company’s $32.3 million cash position and about 28 per cent of its market capitalisation, which sits at $88 million at the time of writing.

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

“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.

“Renowned for its high-quality products, iKOU has a loyal, repeat customer base. The business has strong foundations, and we see additional opportunities to grow the brand, replicating its NSW success in other Australian states through the Adore Beauty platform.”

The news comes two months after Morton revealed she would be stepping down from the role of CEO due to personal reasons, but will remain with the company by taking on a consulting position to provide strategic advice.

An experienced retail executive who has previously held senior roles at My Pet Warehouse (now part of Woolworths-owned PetStock), Priceline (now part of Wesfarmers), Kathmandu (ASX: KMD), Coles (ASX: COL) and Spotlight, Morton has been credited with returning Adore Beauty to growth.

For the third quarter of FY24, the company announced revenue was up 8.9 per cent year-on-year to hit $45 million, with a record 514,000 customers returning to purchase more products. Adore Beaty said it remains on track to achieve an EBITDA margin of two to four per cent this financial year, but noted retail conditions are expected to remain challenging given continued higher cost of living pressures and subdued customer sentiment.

Subject to the satisfaction of certain conditions, Adore Beauty expects to complete the transaction of iKOU by 31 July 2024.

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