- Transformational year for beauty retailer
- First-half sales down by a fifth
- Return to growth forecast for Q4
Revolution Beauty’s (REVB:AIM) share price chart looked ugly on Wednesday, the stock cheapening 11.5% to 16p after the cosmetics minnow unmasked a mixed first-half update including a worse-than-expected plunge in revenue.
In the midst of a painful corporate makeover, the beauty retailer expects sales for the year to February 2025 to be down year-on-year, albeit the rate of decline should moderate from the rate seen in the first half.
Encouragingly, the makeup-to-skincare seller forecast a return to growth in the fourth quarter as new growth initiatives take effect, growth that is expected to accelerate through the year to February 2026.
TAKING STOCK OF THE TURNAROUND
Revolution Beauty’s sales plunged 20% to £72 million in the first half ended 31 August, worse than the 15% drop analysts had expected, as the company streamlined its product range and cleared out non-core products to generate cash.
There was also disappointment as Revolution Beauty, which has delivered a string of uninspiring updates since joining the stock market in 2021, announced its half-year results would bear the scars of an £11.3 million non-cash stock provision.
The embattled beauty brand remains on track to meet full-year 2025 earnings guidance despite the lower revenue.
This reflects the improved profitability in the underlying business with new management focused on the Revolution Masterbrand, cutting costs and expanding margins.
PRETTY GOOD PROGRESS
Sales from Revolution Beauty’s core product range grew 6% in the half, with growth accelerating to 16% in the second quarter, and management called out positive progress with existing and new retailers.
The company has agreed a new relationship with DM Germany, Germany’s number one mass beauty retailer, where Revolution Beauty will launch in more than 850 stores in January 2025.
It is also expanding into 250 new UK Boots stores this month, while in the US, Walmart (WMT:NYSE) will carry a full assortment of Revolution Beauty’s products in more than 1,800 stores from January 2025, and its new Amazon US shop is growing ahead of plan to boot.
REIGNITING THE REVOLUTION
Chief executive Lauren Brindley highlighted ‘great progress in our Reigniting the Revolution strategy’ over the past six months. ‘We expect a return to growth in Q4, as we begin landing our new growth initiatives, including a reinvigorated pipeline of make-up innovation, the launch of our new Skincare range and the global expansion of our budget brand, Relove.’
Russ Mould, investment director at AJ Bell, said the one saving grace from Revolution Beauty’ poor performance relates to non-core product sales as the company shifts focus to its core brand.
‘Profit remains on track for now, despite the lower revenue,’ said Mould, ‘and this reflects improved profitability in the underlying business. However, clearing discontinued and non-core stock looks like it will continue to weigh on financial performance for some time to come.
‘The company is progressing some strategic initiatives like new product launches and developing relationships with major retailers in Germany, the UK and the US, including Boots and Walmart. However, it has very little credit in the bank with investors and it will be interesting to see what major shareholder Boohoo (BOO:AIM) does with its stake as it reportedly considers selling off assets in the wake of its own indifferent performance.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
