Shares of online fashion retailer Adore Beauty Group Ltd (ASX: ABY) made a 10% recovery yesterday after the company released a price-sensitive announcement to the market.
With shares now trading just below $5, this is still roughly 25% lower than their offer price of $6.75 when Adore listed on the ASX late last year.
ABY share price
Adore background
Adore is a pure-play online cosmetics retailer that serves over 18.5 million users in Australia and New Zealand through its e-commerce platform that has over 11,000 different products.
The company was founded in 1999 by CEO Kate Morris who originally ran the business from her garage. Since then, Adore has grown to become Australia’s only beauty retailer to exclusively sell online with over $165 million revenue in FY20.
Share price jumps
Yesterday, Adore released an investor presentation that was to be delivered at the Goldman Sachs Emerging Leaders Conference, which likely explains why the share price jumped.
Although the presentation didn’t provide any Q3 trading update or earnings guidance, it did outline the potential market opportunity to which investors reacted quite positively to.
Universal Store Holdings Ltd (ASX: UNI) also presented at the conference and its shares gained 10% on the day, so the sentiment around some of the ASX retailers seemed to move together yesterday.
Large market opportunity
Adore’s shares don’t come cheap, but it’s important to remember that Adore is still an emerging playing in a large and growing Total Addressable Market (TAM).
The Australian beauty and personal care market is estimated to be worth around $11.2 billion per year, with online transactions only accounting for roughly $1.3 billion.
Adore currently only has a fraction of the total market share with annual revenues close to $165 million, so it seems Adore’s current valuation may be fairly reasonable if it’s able to successfully execute and capture additional market share.
Summary
Adore is another ASX growth share for the watchlist for me. It seems to be in a competitive position that’s further enhanced by some structural tailwinds involving the adoption of e-commerce.
As mentioned in my previous article on Adore, its shares have a fairly steep price tag, but this is likely reflective of the large market it operates in and its ability to grow as it expands into adjacent markets.
For other retail share ideas, click here to read: 2 high quality ASX retail shares to watch in April.
I’d also suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
