Adore Beauty share price plunges 7% despite profit boost

The company posted $200 million of revenue and a $2.4 million after-tax profit.

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Key points

  • The Adore Beauty share price is suffering on Monday, down 7% at $1.71 after diving 15% on opening
  • Its fall comes despite the company revealing an 11% increase in full-year revenue and a whopping 181% jump in after-tax profits
  • However, it warned its earnings will likely be hampered by previous lockdown-induced growth and inflationary pressures in FY23

The Adore Beauty Group Ltd (ASX: ABY) share price is sinking after the company posted its earnings results for financial year 2022 (FY22).

The online retailer's shares opened in the red before tumbling to an intraday low of $1.55 apiece, marking a 15.7% fall.

They have since regained some ground. The Adore Beauty share price is currently $1.71, 7.07% lower than its previous close.

Adore Beauty share price sinks despite posting $200m revenue

Here are the key takeaways from the online beauty retail pureplay's FY22 results:

FY22 saw Adore Beauty push forward with longer-term strategic initiatives, driving its topline growth.

Its mobile app contributed 7.7% of its revenue in the first quarter. That figure had doubled to 15.5% by the final quarter. Additionally, its loyalty members accounted for 60% of revenues in FY22.

The company ended the period with $29.8 million of cash and no debt. Its inventory levels are slightly higher than the pcp in a bid to support growth.

What else happened in FY22?

The Adore Beauty share price tumbled 75% over the course of FY22.

Meanwhile, it launched its own skincare brand Viviology. Sales in the first month of its launch exceeded internal expectations.

What did management say?

Adore Beauty CEO Tennealle O'Shannessy – who will step down from the role in February – commented on the company's full-year results, saying:

FY22 has been another successful year for Adore Beauty, one in which we delivered record revenue, multiple record trading days, and strong growth across key customer metrics, while continuing to re-invest in the business.

Our changing active customer base now has a higher proportion of returning than new customers, with subscription-like retention rates after just two years on the platform.

Our investments in strategic priorities are contributing to improved customer retention and lifetime value, and will drive sustainable, long-term growth as online adoption in Australia's beauty and personal care market catches up to the UK, USA, and China. The online leader in each of these markets has taken a disproportionate share of growth as e-commerce penetration increases. As Australia's incumbent, we are best placed to grow customers, revenue, and margins as our market matures.

What's next?

Adore Beauty's FY23 outlook is likely weighing on its share price today.

It warned it's cycling off a period of significant growth in the first half of FY22, leaving growth comparisons volatile.

That's reflected in the company's revenue for the first seven weeks of FY23, which has slipped 28% on that of the pcp. Adore Beauty expects to post double-digit revenue growth for the second half of FY23 as it finishes cycling COVID-19 lockdown growth.

It also warned its facing inflationary pressures and subdued consumer sentiment. It's working to implement cost control measures as a result.

Given such impacts, the company doesn't expect to achieve an EBITDA margin of between 2% and 4% in FY23. Though, it expects to remain profitable and return to its targeted EBITDA margin range in FY24.

Adore Beauty share price snapshot

It's certainly been a rough 12 months for the Adore Beauty share price.

It has fallen 57% since the start of 2022. It's also currently 64% lower than it was this time last year.

For context, the All Ordinaries Index (ASX: XAO) has dumped 9% year to date and 7% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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