Revolution Beauty hails progress as it recovers from tough times

Revolution Beauty Group continues to bounce back from its recent woes with the company on Wednesday reporting a return to profitability for the year to the end of February and saying it has made “good progress with reigniting the Revolution strategy”.

The multi-channel mass beauty company said revenue rose 2% to reach £191.3 million and gross profit was up 16% at £88.4 million. The gross margin rose from 40.4% to 46.2%. The company also managed to report a 9% drop in operating costs with a three-year cost-savings programme under way.

This meant that adjusted EBITDA jumped from a loss of £7.5 million in the previous year to a profit of £12.6 million this time. And adjusted EBIT swung from a loss of £23.4 million to a profit of £7.4 million. Adjusted profit before tax surged from a £26.7 million loss to a £4.3 million profit.

Of course, these weren’t statutory figures and essentially show the underlying performance of the group excluding large, non-cash and exceptional items. But the picture was also strong on a statutory basis. For instance, profit before tax rose from a loss of £33.9 million to a positive £11.4 million. 

Sales ups and downs

The company said that the 2% sales increase included the impact of significant product clearance activity in the first half and that its strong performance in the Rest of World territory “more than offset weakness in [the] US and e-commerce”.

Looking more closely at the sales figures, the UK declined by 6.7%. Although UK store revenue actually grew, digital revenue fell as digital marketing spend was reduced and customers continued the return to the high street. 

The US fell by 14.8%, driven by store revenue declines as the US business went through a period of volatility. It was significantly impacted by the changes taking place in the business during the year and steps have been taken to stabilise the US business in recent months.

But the ROW segment grew by 22.8%, driven by growth in direct retail and sales through distributors channels.

The gross margin improvement came as it focused on inventory management and profitability and the adjusted EBITDA rise was a result of the improved gross margin, controlled reductions in marketing spend and reductions in distribution costs.

Future focus

The company added that it has a “clear strategy in place to ‘Reignite the Revolution’ by focusing on the Revolution Masterbrand and powering core product categories, to become a global top five player in the mass beauty market”.

It saw an expansion of retail distribution across key geographies and its NPD strategy launched, with a greater focus on efficiency.

Gross inventory also reduced by 32%, plus it boasted “improved service levels” during the second half of the year for all retailers. Its social media followers also increased from 5.9 million to 6.4 million.

CEO Lauren Brinkley said of all this: “FY24 was a year of great strategic and financial progress following two challenging years. Our new Reigniting the Revolution strategy is already delivering improvements across the business, strengthening our core and providing a much firmer platform from which to grow.

“As we progress through the new financial year, I am excited about the potential of our reinvigorated pipeline of innovation and the number of opportunities to expand our retail distribution globally.  As the strategy continues to take effect, we expect to see a return to growth in the second half of the year. That will put us firmly on the right trajectory.”

As for FY25 — the current financial year — she expects revenues to decline year on year in the first half at a slightly higher rate than in the second half of FY24, “reflecting our more focused product portfolio and the impact of stock clearance in the first half of FY24”. 

But with a “reinvigorated innovation pipeline and opportunities to expand our offering and distribution network, we expect a return to revenue growth in the second half”. Benefitting from the group’s ongoing cost savings programme, Adjusted EBITDA for FY25 is expected to be at least in line with FY24 with a significant weighting to the second half.