Adore Beauty keeps the faith in new stores as Black Friday ‘overperformance’ hurts profits

Adore Beauty says it has been dragged down by heavy discounting during the Black Friday and Cyber Monday sales as the cosmetics retailer posts a 70 per cent decline in half-year profit.

But chief executive Sacha Laing is sticking with its full-year guidance in hopes new store openings will attract more customers and boost sales.

Originally an online retailer, Adore has been ramping up its bet on bricks-and-mortar under Mr Laing, who took over as chief executive at the end of 2024.

By pushing into physical stores, Adore hopes to better compete with major industry players Mecca — which holds the biggest market share in cosmetics in Australia at about 21 per cent — and Sephora, the beauty chain owned by French luxury goods giant LVMH.

Mecca’s latest accounts revealed it cracked the $1 billion revenue barrier in the year to December 2023, up from the $971.5m recorded the previous year.

On Tuesday, Adore reported a 70 per cent decline in net profit to just under $190,000 in the 26 weeks to the end of December as revenue lifted 8.7 per cent to $111.9 million.

There were no dividends paid.

The poor profit result sent Adore shares tumbling 27.9 per cent to 62¢ at the close.

Adore said increased promotions during the sales period at the end of the year hurt gross margins.

Mr Laing added margin pressures stemmed from “the overperformance and share performance of the Black Friday and Cyber Monday promotional period”.

During the half, the retailer opened 10 stores to take its total network to 18 locations under brands Adore and Ikou, the wellness and skincare label it acquired in 2024 for $25m.

Mr Laing said it was slated to add six more stores across the two brands this calendar year as it aims to have a network of more than 25 sites by the end of 2027.

Adore said it was on track to meet its full-year guidance for an underlying earnings margin of 3 to 4 per cent.

“While retail trading conditions remain challenging, improving quality of revenue remains a priority for the business, as we continue to acquire more customers at the top of the funnel, reduce our promotional cadence, increase share-of-wallet, and grow our higher-margin Ikou brand,” Mr Laing said.

Elsewhere in corporate retail results on Tuesday, half-year revenue at the Brett Blundy-backed City Chic came in at $69.2m — slightly down from the previous year’s $69.5m. It trimmed its losses from $6.7m a year earlier to $3.5m.

In Australia and New Zealand, revenue increased 7.4 per cent, supported by “robust consumer demand” and an improved product performance, with momentum carrying over into the second half.

But City Chic’s American business continued to flounder, weighed down by the fallout of President Donald Trump’s tariffs.

The company said it was preparing for a fourth quarter sales relaunch, supported by new-season stock already ordered in anticipation of US customers flocking to its stores for summer clothes.

Like Adore, City Chick paid no dividends in the half.