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Record customer retention levels and improved operational efficiencies have helped Adore Beauty Group (ASX: ABY) return to profit in FY24, with the company reporting sales momentum has continued into the current year.
Adore Beauty has posted a bottom-line profit of $2.175 million for the 12 months to the end of June, up from a $559,000 loss a year earlier.
Reported EBITDA of $4.8 million is up 661 per cent on the previous year as revenue lifted 7.4 per cent to $195.7 million with operating efficiencies flowing through to the bottom line.
But Adore Beauty also credits customer retention, now at a record 64.7 per cent, for the company’s solid performance in FY24. Customer retention benefited from 8.6 per cent growth in loyalty members over the year, while mobile app adoption surged 48.6 per cent to now represent 28.4 per cent of sales.
Adore Beauty says its mobile app is now nearing its initial 30 per cent sales target, with app customers generally higher value and order frequency than web customers.
An investment in marketing also led to a reported lift in brand awareness among the company’s core demographic to a record 71 per cent from 62 per cent a year earlier.
“Adore Beauty’s loyal, returning customer base continues to underpin our revenue growth, contributing almost 80 per cent of all product sales and driving improvements in basket sizes and annual spend per active customer,” says departing Adore Beauty CEO Tamalin Morton.
“Delighting our customers remains our top priority. We’re seeing the benefits of our customer-centric strategy, with retention improving 8.5 percentage points over the year.
“We are also continuing to expand our product range - now with over 300 brands - to ensure we have a compelling beauty and wellness proposition for our customers.”
Morton, who will be replaced on 1 October this year by former General Pants Co CEO Sacha Laing, notes that revenue growth for the year has been supported by gains in operating efficiencies to improve profitability.
“Our marketing has been more effective with expenditure down 3 per cent on last year, whilst our sales, customer base and brand awareness have all grown,” she says.
“We’ve also developed the retail media arm of our business, which represented circa $4 million in revenue in FY24. We’ve invested in a dedicated team to further build on our award-winning content and its commercialisation opportunities, which should account for a larger proportion of revenue over the coming years.
“Our expanding product offer, private label portfolio, and our first Adore Beauty store footprint, further diversify our revenue and margin profile and support our long-term profitability targets.”
Adore Beauty plans to consolidate brand awareness among a broader demographic in the current year with a new brand campaign and the opening of two Adore Beauty retail concept stores in Melbourne.
While the company expanded its product offering during the year with 38 new brands, including Burberry, Bali Body, Therabody, Liberty Belle RX and Shark, it still sees its own brands as pivotal to improving long-term profitability.
Adore Beauty added 23 new products to its private-label portfolio, growing it to 61 products across the AB LAB, Viviology and Adore Beauty brands. Among the new products is Adore Beauty’s first cosmetics range, launched in the second half under the AB LAB brand.
The company has also secured a trial distribution agreement for its Viviology range to be stocked in selected skin clinics in NSW.
Adore Beauty has made a positive start to FY25, with revenue in the first seven weeks up 7 per cent compared to the previous year.
The company is targeting $10 million in revenue this year from premium Australian beauty and wellness brand iKOU, which was acquired for $25 million at the end of last month. It expects to more than double this figure by the end of FY27.
The iKOU acquisition includes established retail, online and wholesale operations, and scales Adore Beauty’s high-margin private label portfolio by over 300 products.
Adore Beauty says it has identified opportunities to grow the iKOU brand, including through an expanded retail presence, wholesale, internationally and range expansion.
While retail conditions are expected to be challenging over the year ahead, Adore Beauty says it is “well positioned to increase revenue, active customers, market share and profitability”.
The company is targeting an EBITDA margin of 4 to 5 per cent in FY25, up from 2.5 per cent in FY24.
Shares in Adore Beauty were trading at $1.175, up 7.5c, at 12.32pm (AEST).
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