Online beauty retailer Adore Beauty Group Ltd (ASX: ABY) has announced its first-half results to the market.
The company is the number one pure-play online beauty retailer in Australia, with over 260 brands and 10,800 products.
After initially surging by 11% in early morning trade, gains in the Adore Beauty share price have reversed, with shares sitting more than 3% lower at midday.
Revenue soars as management beats prospectus guidance
The business recorded an impressive 85% increase in revenue to $96.2 million. The result was 8% ahead of the prospectus forecast, spurred by record sales over Afterpay Day in August, Cyber Weekend in November, and a busy holiday period.
In line with revenue, active customers increased by 82% to 777,000 compared to last year. New customers increased by 84% to 276,000.
Adore’s gross profit margin improved by 1.4 percentage points to 32.5%, underpinned by improved supplier terms and brand funding.
EBITDA of $5.2 million was 58% ahead of prospectus guidance and up 188% to last year. This was mainly due to the benefits of scale, with more dollars dropping to the EBITDA line.
Net profit after tax rose steadily from $0.9 million to $3.1 million.
The business remains well capitalised with $25.9 million cash on hand and no debt.
Operational highlights
Adore Beauty’s average annual order frequency remained steady at 2.1 orders. Similarly, the average order value marginally increased from $100.10 to $100.50.
The retailer registered an enviable net promoter score (NPS) of 82, highlighting growing customer satisfaction. Customer retention also increased by 4.2 percentage points to 65.5%.
Brand awareness increased to 52%, driven by expanded marketing efforts including a national television campaign.
Downloads from the popular Adore Beauty Podcast, a means of connecting with customers and sharing insights from industry experts and professionals, increased 84% with approximately 930,000 downloads during the half.
Other initiatives included its mobile app launch, pilot of a private label accessories offering, and onboarding 33 new brands.
Outlook
The company did not provide any guidance, however noted full-year revenue growth is expected to be above pre-COVID levels given the continued shift to e-commerce.
As the business continues to grow, management expects the benefits of scale to increase operating leverage and deliver further EBITDA expansion.
My take
Despite an impressive set of results, Adore’s share price has lagged its IPO price of $6.75, indicating it may have been overvalued when floated.
While the structural shift to e-commerce will continue in 2021, it will be interesting to see if management can maintain the current growth rates, or if the new customers who have joined in 2021 drop off.
At the moment, I’ve added Adore Beauty to my watchlist and will be tracking active customers and customer retention.
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