Australian retailer Adore Beauty (ASX: ABY) has reported a sharp rise in profitability and margin expansion for the first half of the 2025 financial year (FY25) as its refreshed operational strategy focused on disciplined cost management and the expansion of its retail network begins to take shape.
Strong financial performance
The company posted operating earnings (EBITDA) of $2.8 million for the half-year which represents a 98 per cent jump from the same time last year. Its EBITDA margin clocked in at 4.5 per cent. Similarly, EBIT of $2.8 million surged by 126 per cent from twelve months prior.
Notably, the group generated a cash flow positive half-year. It also delivered a record gross margin of 36.2 per cent, marking a 270 basis point increase on the previous corresponding period.
Revenue for the first half of FY25 ticked up by 2.3 per cent to reach $103 million, whilst its database of contactable customers jumped by 20 per cent to now surpass 1.25 million.
Adore Beauty’s chief executive officer Sacha Laing commented:
“Our half-year results demonstrate the strength of the Adore Beauty brand and the early momentum of our strategy refresh focusing in the near-term on enhancing quality of earnings and optimising our operating model. I am delighted with the demonstrated gains in gross margin which delivered material improvement and the subsequent 126% growth in EBIT in the half.”
Physical retail network expansion
Traditionally an online-only player, Adore is expanding into physical retail having recently opened its first store at the Westfield Southland shopping centre in Victoria. A second physical location is set to launch in March at the Watergardens precinct.
Management noted that the integration of wellness brand iKOU – as announced in June last year – is now complete and performing in line with expectations, positioning the company for accelerated growth via a physical retail store network.
By the end of 2025 the company plans to open four to six more stores across Western Australia, New South Wales, and Queensland, with iKOU also expanding with a flagship Melbourne store scheduled to open in April.
Adore expects the store rollout to significantly grow its customer base and sales, complementing its established digital presence.
It ended the first half of FY25 with a healthy cash balance of $11.7 million and no debt despite spending $20 million on the iKOU acquisition and funding its initial store openings.
Growth strategy kicks into gear
More broadly, the company launched its new strategy in November last year as it looks to leverage multiple growth initiatives to achieve a 30 per cent revenue rise and the doubling of its EBIT margin across three years.
It plans to establish a national retail store network of more than 25 locations across its Adore Beauty and iKOU brands, and grow its slice of an addressable market within the Australian beauty industry valued by the company at $13.9 billion.
The stores will be integrated with Adore’s online digital ecosystem and infrastructure. They will also be supported by the company’s established brand position to help boost awareness, customer acquisition, and sales.
Further growth initiatives
To drive further growth in retail media, the company has recently invested in a dedicated team and technology platform which it sees as another highly margin-accretive revenue stream.
It also remains focused on enhancing its existing customer engagement and retention via mobile app adoption, subscriptions services, its loyalty program, and advanced data and AI capabilities.
Management believes Adore is well positioned to deliver a material step change in both revenue and profit growth over the next three years as margins expand and as the company’s online channels and store network expand.