Revolution Beauty Plunges as Sales Slump, Expects Q4 Return to Growth

Revolution Beauty Group's (LON: REVB) share price plummeted by around 22% on Wednesday after the company's latest trading update disappointed investors.

The beauty retailer reported a 20% decline in total net sales for the first half of the year, coming in at £72 million. The company said this was driven by the planned simplification of its product portfolio and the associated discontinuation of unproductive SKUs.

The decline is also said to reflect significant stock clearance activity in the first half of FY24.

Despite the overall sales slump, Revolution Beauty's core product range saw a 6% increase in sales, accelerating to 16% in the second quarter.

The company also highlighted improved margins and cost savings from streamlining its operations. Operating costs, excluding marketing costs, decreased 31%, and administrative costs decreased 25% year on year.

However, underlying adjusted EBITDA was £3.1 million in the first half, down from £3.5 million last year. 

In addition, a one-off, non-cash stock provision of £11.3 million weighed on the company's results. This provision is intended to reflect the net realisable value of the remaining old inventory.

Looking ahead, REVB said sales for FY25 are now expected to decline year on year at a slightly slower rate than in H1.

The company expects a return to growth in the fourth quarter as new strategic initiatives take effect, while it is also confident in its ability to maintain or improve its underlying adjusted EBITDA for the full year.

Lauren Brindley, CEO of Revolution Beauty, said: “We have made great progress in our Reigniting the Revolution strategy. We have reduced our SKU portfolio significantly, enabling improved underlying gross margin performance, on a core set of SKUs that are growing globally.”

Brindley added: “We expect a return to growth in Q4, as we begin landing our new growth initiatives, including a reinvigorated pipeline of make-up innovation, the launch of our new Skincare range and the global expansion of our budget brand, Relove. I remain highly confident that our Reigniting the Revolution strategy will deliver attractive, long-term, profitable growth.” 

Revolution Beauty is set to announce its full half-year results in November.