Revolution beauty narrows losses as sales rise in H1

By

Sandra Halliday

Published
Jun 2, 2023

It may be only a few days since the last set of Revolution Beauty results were released, but they were the delayed figures for the year to February 2022. On Friday, the struggling company almost got back on track with its results for the six months to August 2022.

The retailer said it narrowed its losses in the period and saw a “solid” performance in both the UK and internationally.

The multi-channel mass-market beauty company also delivered an update for the current financial year (FY24) and said it said it saw an “improving trend of performance through the second half of FY23”. Revenue for that year should be up in low single-digits with a “small loss” on an adjusted EBITDA basis.

As for the current year ending next February, it has seen “encouraging trading” so far with revenue at the end of Q1 “in line with internal forecasts”. 

The sell-through in key retailers has been “strong, despite the cost-of-living crisis, demonstrating the strength of our brand and price proposition. The global outlook for the beauty business continues to grow”.

Its current expectation for FY24 is high single-digit growth in revenue, and constant currency adjusted EBITDA in the high single-digit millions.

So, back with those H1 FY23 results, revenue fell 4.2% to £75.3 million, but gross profit was up 35.6% at £31.2 million. The gross margin rose to 41.4% from 29.3% a year earlier, and while it still made a loss on an adjusted EBITDA basis, that loss narrowed from £9.5 million a year ago to £7.5 million this time. The operating loss also shrank by 48.9% to £12.1 million and the net loss was reduced by 53.6% at £13.4 million. 

UK stores revenue grew 21% year on year, helped by new distribution in Boots, and good performance across Superdrug stores.

New distribution in Walgreen also “ensured US stores revenue was flat in an environment where US retailer performance continued to recover following the pandemic”.

Rest of the world store groups were down 6% year on year, due primarily to the timing of order placings.

It added that digital wholesale revenue declined by 22% “as the digital sector struggled with overstocking (with the return of bricks and mortar retail coming out of the pandemic), and our own web sales declined 8%”.

But the higher gross margin was good news, mainly due to the stock provision charge in H1 23 being £3.5m versus a charge of £14.3m in H1 22.

Essentially, the story is one of expansion as it increased the number of doors worldwide on the back of “new retail relationships, expansion of existing relationships and entry into new territories”. That included a “successful rollout into Walmart stores in [the] US”, while growth in DTC customers, increased the total customer base by 3%, with returning customers increasing by 6%.

It added that the publication of the H1 23 interim results “is an important step on the journey towards the lifting of the share suspension”. Its shares have been prevented from trading for some time since concerns first emerged over its accounting and some business practices.

CEO Bob Holt said: “The half was one where our digital business was impacted by consumers moving back to bricks-and-mortar retail stores post-pandemic, but where Revolution's omnichannel retail strategy mitigated the decline, with solid retail performances in our key markets. Our future growth is first and foremost via a global retailer strategy. Our direct-to-consumer online customer base grew in the year albeit we recognise the sentiment of a decline in online sales. As we look ahead, we remain confident, and expect single-digit revenue growth in both the FY23 financial year, and the current FY24 financial year.”