Adore Beauty applies foundations of profitability with record result

Adore Beauty applies foundations of profitability with record result

Adore Beauty CEO Tennealle O’Shannessy.

Online cosmetics retailer Adore Beauty (ASX: ABY) has turned a profit in its first year as an ASX-listed company as CEO Tennealle O’Shannessy highlights high levels of customer engagement and retention, lifting sales by 48 per cent to hit $179.3 million in FY21.

The Melbourne-based company's EBITDA rose by a higher percentage still at 53 per cent to reach $7.6 million. But reinvesting earnings to drive growth is a key part of Adore Beauty's strategy, spending more than a third of gross profit on advertising and marketing, and almost a third on employee benefits.

This means that on a statutory basis profit after tax was just $845,000, but this is in contrast to a $1.3 million loss in the previous financial year.

The group also appears to have wiped clear the active customers issue that confused investors a few months ago when it reported a figure that was below the numbers mentioned in a February half-year report, prompting a clarification that comparisons were not like-for-like.

The number of active customers stood at 818,000 by the end of June, representing 39 per cent growth on FY20, while returning customer growth was up 64 per cent.

The average customer is also spending 7 per cent more than before at $219 each, although the financials show Adore Beauty is notching about just over $1 in statutory profit per active customer and about $9.29 in earnings.

"Adore Beauty has had an exceptional start to listed life, delivering record revenue and profitability in its first full-year result," O’Shannessy says.

"Our record financial performance in FY21 highlights the strength of our underlying business, and our market leading position as the online destination of choice within a large $11 billion addressable market.

"Adore Beauty continues to capitalise on the structural shift to online channels, rapidly adding new customers that are profitable within the first year."

O'Shannessy says the company is committed to delivering a personalised and customer-led "beauty discovery" and shopping experience, underpinned by ease, convenience, and authentic, trusted content.

"Adore Beauty’s integrated content, marketing and e-commerce platform is unique in the Australian beauty market, offering ~260 leading brands combined with an exceptional customer experience," she says.

"We leverage our digital content, media and owned marketing channels to create highly engaged and loyal customers with subscription-like retention rates.

"Our loyalty-driven business model is delivering sustainable growth across all key metrics, including annual revenue per customer and average order value."

The CEO believes the strong returning customer rates and the acquisition of new customers bode well for momentum and growth in the current financial year and beyond.

"Adore Beauty’s passionate and dedicated team has made excellent progress on the execution of our growth strategy, further building on our market leadership and strengthening our competitive advantages," she says.

"The successful launch of our native mobile app and loyalty program enables us to engage, retain and grow the lifetime value of our customers in a cost-effective manner."

Adore Beauty closed out the financial year with $29 million in cash and generated $4.2 million in operating cash flows. In the almost two months since FY22 began, revenue has been up 26 per cent year-on-year but the company will not provide guidance due to uncertainty related to COVID-19.

ABY shares are up 3.74 per cent at $4.99 each at 10:45am AEST.

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