Higher margins and an increase in owned-brand sales has helped Adore Beauty Group (ASX: ABY) almost double underlying earnings in the first half of FY25.

The online retailer, which next month opens its first branded retail outlet, has reported EBITDA of $4.6 million in the six months to the end of December – up 94 per cent compared to the same period a year earlier.

The underlying profit result for the half year is just shy of the $4.8 million recorded in the FY24 full year, with the result supported by a 2.4 percentage-point increase in gross margin to a record 35.9 per cent.

The strength of the profit performance, which was also aided by improved operational efficiencies, is reflected in the modest increase in group revenue to $103 million, up 2.3 per cent.

The company, which recorded an EBITDA margin of 4.4 per cent in the first half, has reaffirmed guidance of 4 to 5 per cent in FY25

Adore Beauty, formerly a pureplay online beauty retailer, announced a shake-up of its business model in November last year with plans for a “high growth omni-channel strategy” that will target 30 per cent revenue growth and a doubling of EBIT margin over the next three years.

The strategy includes the opening of more than 25 physical stores across Australia that the company says will “materially broaden’ its addressable market.

“Our first-half result demonstrates the effectiveness of the early phases of our strategy refresh to improve Adore Beauty Group’s quality of earnings and long-term profitability as we evolve over the next three years into a leading omni-channel beauty retailer,” says Adore Beauty CEO Sacha Laing.

“Our plans to open 25-plus physical stores are on track and will deliver a material step change in our revenue growth and profitability metrics.”

Adore Beauty recorded EBIT of $2.7 million for the first half of FY25, up 118 per cent on the previous year. The figure excludes restructuring and acquisition costs.

During the period, the company settled the $25 million acquisition of Blue Mountains-based organic beauty and wellness brand iKOU -  a deal that included three branded outlets.

The company is expanding the iKOU retail footprint this year with new stores planned for Berry in NSW and Melbourne’s CBD in March.

Adore Beauty also has plans to open between four and six company-branded stores this calendar year, with the first scheduled for this Saturday 1 February at Westfield Southland in Melbourne and the second at Watergardens in the city’s west in early March.

Adore Beauty says the openings are in line with its strategy of growing owned brands through its retail channel in new geographic regions.

When announcing its FY24 full-year earnings results in August last year, Adore Beauty noted that customer retention hit a record high of 64.7 per cent, which was boosted by 8.6 per cent growth in loyalty members over the year.

The mobile app, which has seen a sharp increase in adoption by customers over the past year, now accounts for close to 30 per cent of group sales.

Along with the physical store rollout, Adore Beauty says it plans to continue leveraging its “online beauty expertise, content creation capability and authenticity” to enhance existing customer engagement, frequency and retention.

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