• Revenue: $103 million, an increase of 2.3% on the prior year.
• Gross Margin: Increased by 270 basis points to 36.2%.
• EBITDA: Nearly doubled to $4.7 million, with a margin of 4.5%.
• EBIT: $2.8 million, a 126% uplift, with an EBIT margin of 2.7%.
• Operating EBITDA: Increased 64.8% to $4.3 million, with a margin of 4.2%.
• Marketing Expenses: Decreased by 0.6 percentage points to 13.3% of sales.
• Cash Position: $11.7 million in cash on hand as of December 31, 2024.
• Customer Database Growth: Contactable database grew by 20% to 1.26 million.
• Active Customer Base: Increased by 4%.
• Store Expansion: First physical store opened, with plans for four to six additional stores in 2025.

• Warning! GuruFocus has detected 3 Warning Signs with AUDGF.

Release Date: February 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Adore Beauty Group Ltd (ASX:ABY) reported a gross margin increase of 270 basis points, reflecting successful margin accretive initiatives.
• The company completed the acquisition of iKOU, which is performing well and is expected to contribute to future growth and margin expansion.
• Adore Beauty's contactable database grew by 20% to 1.26 million, with a 4% increase in active customers, indicating strong customer acquisition efforts.
• The launch of the first physical retail store marks a significant step towards becoming an omnichannel beauty retailer, with plans for additional store openings.
• EBITDA nearly doubled to $4.7 million, and EBIT increased by 126%, demonstrating the effectiveness of the company's strategic refresh and focus on profitability.

Negative Points

• Revenue growth was modest at 2.3%, indicating potential challenges in accelerating top-line growth.
• The company's cash position decreased significantly from $32 million to $11.7 million, largely due to investments in acquisitions and new stores.
• There was a slowdown in the core online business growth in the latter part of the year, attributed to a focus on profitable revenue rather than volume.
• The competitive landscape in the physical retail space, with established players like Mecca and Sephora, poses a challenge for Adore Beauty's store differentiation.
• The company has not provided detailed segment reporting, making it difficult to assess the individual performance of new initiatives like iKOU and retail stores.

Q & A Highlights

Q: Can you explain the slowdown in the core online business growth in the last four months of the year? Was it expected or due to external factors? A: Sacha Laing, CEO: The slowdown was a conscious decision to focus on quality of earnings. We prioritized profitable revenue, which involved refining our promotional cadence and removing unprofitable products. This approach aims for sustained long-term profitability rather than just top-line growth.

Q: With the focus on profitable revenues, can we expect the core online business to grow at market rates or remain flat? A: Sacha Laing, CEO: We do not expect the online business to remain flat. We are focused on growing both the core and online business, supported by the halo effect of our store network. Our gross margin growth is a key performance indicator, and we expect it to continue improving.

Q: You've achieved a 200 basis point margin expansion already. Can we expect further gross margin improvements, especially with the new physical stores? A: Sacha Laing, CEO: Yes, we expect further margin improvements. Key drivers include managing promotional cadence, growth of our own brands, and retail media expansion. Our new platform and dedicated team will continue to drive revenue and service for our brand partners.

Q: How does Adore Beauty plan to differentiate its physical stores from competitors like Mecca and Sephora? A: Sacha Laing, CEO: Our stores are an elevated extension of our online platform, deeply digitally immersed with features like digital pricing and content linked to our online ecosystem. We offer a brand-agnostic environment with personalized advice, creating a unique shopping experience.

Q: What are the key metrics investors should focus on now that Adore Beauty is becoming an omnichannel retailer? A: Sacha Laing, CEO: Focus on gross profit margin improvement, EBIT margin expansion, and EBITDA margin growth. These metrics reflect our strategic focus on profitability and long-term shareholder value, driven by our store network and own brand growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.