- Cosmetics supplier delivers record first half sales
- Online revenue growth continues to accelerate in UK and US
- In ‘active discussions’ with ‘additional major retailers’
Shore Capital upgraded its earnings forecasts for Warpaint London (W7L:AIM) yet again after the colour cosmetics supplier delivered head-turning first half results highlighting broad-based sales growth that has continued into the second half of the year.
Shares in the Iver-based firm ticked up 1.6% to 130.6p as the owner of the W7 and Technic brands, growing with customers ranging from Tesco (TSCO) and Boots to TJX (TJX:NYSE) and Five Below (FIVE:NASDAQ), said it is in ‘active discussions’ with other major retailers.
EYE-CATCHING MOMENTUM
Warpaint’s results for the six months to June 2022 confirmed the strong momentum flagged in a recent unscheduled trading update, with total sales up 37% to a record first half haul of £25.2 million, some 30% higher than 2019’s pre-Covid levels.
The company said online sales continue to accelerate in the UK and the US and despite supply side inflation and elevated freight costs, the company’s gross margin increased to 39% (H1 2021: 34.5%).
This reflected proactive sourcing, margin-enhancing new product development, a price increase at the start of the year and currency hedging.
During the half, UK sales were 17% ahead at £10.4 million and international sales surged 55% higher to £14.8 million.
Encouragingly, Warpaint also reported 38% sales growth on an eight month basis to 31 August 2022, not to mention a bulging £12.9 million Christmas order book said to include a ‘significant increase’ in orders from Asda and a number of US retailers.
Since the half year end, Warpaint has inked deals across the pond to launch initial ranges of W7 products in 280 H-E-B stores (a Texas-based supermarket) from October 2022, and in 190 CVS (CVS:NYSE) stores from January 2023.
CEO Sam Bazini said he was ‘pleased that following the return of the group to growth in 2021 this trend has continued in the first half of 2022. We have grown sales in the UK, continental Europe and elsewhere internationally in the period, all at an improved margin, despite supply side inflationary and other cost pressures.
‘We have been, and continue to be, successful in both adding new retailers to our list of customers and expanding the number of products and outlets served with our existing major customers. I am confident that this can continue and we are working in partnership with a number of our larger existing retailers, both in the UK and internationally, to grow sales further. We are also in active discussions with additional major retailers.’
Having recently (9 September) upgraded its year to December 2022 pre-tax estimate to £9 million following a positive Warpaint trading update, house broker Shore Capital has now raised its full year 2023 and 2024 pre-tax profit forecasts by 9% and 10% to £9.9 million and £10.8 million respectively.
‘Warpaint’s products have strong affordability credentials,’ insisted the broker, ‘and with building momentum across a broadening array of sales channels we believe the group is very well placed for the short and medium term.’
BRIGHT STRATEGIC OUTLOOK
‘Warpaint is a business that in our view has cultivated a bright strategic outlook,’ continued Shore Capital, ‘with an affordable price proposition that looks excellently placed for the tougher economic times ahead.’
The broker highlighted Warpaint’s ‘ever broadening customer base, a growing online capability and international prospects that span the US, Western Europe, Australia and still embryonic China’ and sees ‘strong medium term growth potential, evidenced by what is now becoming a multi-year upgrade cycle.’
