- Underlying earnings up 18%
- Core product lines in growth
- Distribution wins with major retailers
Unloved cosmetics company Revolution Beauty (REVB:AIM) swung from pre-tax profits of £400,000 to a £10.9 million loss after a one-off stock provision during a transitional half to August 2024.
Why then, did shares in the beauty retailer rise 2% to 13.9p today (19 November)?
Well, the company highlighted encouraging progress in its underlying profitability driven by cost savings and margin gains, and there was relief as the makeup-to-skincare products purveyor assured investors full year 2025 earnings should be ‘at least in line’ with last year’s £12.6 million haul.
PRETTY GOOD PROGRESS
Backed by fast-fashion firm Boohoo (BOO:AIM) and emerging from a tough few years, Revolution Beauty’s first half revenue dipped 20% to £72 million.
This reflected the planned simplification of the product portfolio under its ‘Reigniting the Revolution’, which involves focusing on core product categories.
On the (admittedly generous) underling adjusted measure, EBITDA (earnings before interest, tax, depreciation and amortisation) jumped 18% to £3.9 million thanks to a wide-ranging cost-cutting drive.
Encouragingly, sales from the company’s core product range grew 6% in the half, with growth accelerating to 16% in the second quarter. And Revolution Beauty should soon see the benefits of significant new distribution with heavyweights including Walmart (WMT:NYSE) and Amazon (AMZN:NASDAQ), as well as Boots and DM Germany.
Walmart US will carry the full assortment of Revolution Beauty’s products in more than 1,800 stores from January 2025, while DM Germany, Germany’s leading mass beauty retailer, will sell the company’s wares in over 850 stores in January 2025.
ROSIER OUTLOOK
Revolution Beauty reiterated guidance for a decline in sales for the year to February 2025, but with a return to growth anticipated for the fourth quarter as new strategic growth initiatives take effect, growth that is expected to accelerate through full year 2026.
And thanks to strengthening gross margins and with its cost savings programme on track, underlying adjusted EBITDA is expected to be ‘at least in line’ with last year’s £12.6 million result, before a one-off stock provision against non-core product.
WHAT DID THE CEO SAY?
Lauren Brindley, Revolution Beauty’s relatively new CEO, said: ‘As we look to the second half and beyond, we have a strong pipeline of growth initiatives, including new and expanded retailer relationships, a reinvigorated pipeline of make-up innovation, the launch of our new Skincare range and the global expansion of our budget brand, Relove.’
She added: ‘With good momentum in the underlying business, I remain highly confident in the Reigniting the Revolution strategy and in our ability to become a top five mass beauty brand.’
Panmure Liberum, which has a 75p price target for Revolution Beauty’s stock, said ‘the shares are available at a significant discount to peers reflecting execution risk, but we think the strategic shift is progressing well and should deliver improved results soon.’
