ASX retail stock rallies on 94% earnings boost

There was a beautiful update from this retailer.

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A happy beautiful woman with curly brown hair and wearing bright red lipstick smiles representing the soaring Adore Beauty share price today

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The ASX retail stock Adore Beauty Group Ltd (ASX: ABY) has seen its share price jump 4% in early trading in response to the company's FY25 first-half update.

Adore Beauty has decided to give investors an early update about its performance in the six months to 31 December 2024, which saw "strong early momentum" of its strategy refresh, according to the company.

The online retailer of beauty products said it achieved strong profitability after improving the quality of its revenue and underlying profitability. Let's get into the numbers.

Strong start to FY25

Adore Beauty revealed that its revenue increased by 2.3% to $103 million despite the challenging wider macroeconomic conditions.

The e-commerce company achieved a record gross profit margin of 35.9%, an improvement of 240 basis points (2.40%) compared to the first half of FY24.

Growth of revenue and the gross profit margin helped operating profit (EBITDA) soar by 94% year over year to $4.6 million. The EBITDA margin achieved was 4.4%. The EBITDA figures exclude restructuring and acquisition costs.

The EBITDA growth and operating leverage of the business meant that EBIT jumped 118% to $2.7 million.

Adore Beauty reported that it finished December 2024 with a cash balance of $11.7 million.

How did the ASX retail stock achieve this profit growth?

The online beauty business explained that the performance was driven by the implementation of key initiatives in its three-year strategy, which focuses on near-term material profit growth.

Adore Beauty said it's improving earnings through disciplined execution of promotional events, accelerated growth of owned brands, increased contribution from margin-boosting retail media, and focusing on operating costs and working capital efficiencies.

Physical stores

The company noted that it will open its first physical retail store this weekend, on Saturday, 1 February, at Westfield Southland in Victoria, and a second store in Watergardens in Victoria in early March.  

In line with its strategy of growing its owned brands through the retail channel in new geographic regions, it will open new iKOU branded stores in Berry (NSW) and the Melbourne CBD (Victoria) in March.

It's planning to open between four to six new stores in the 2025 calendar year.

CEO comments

The CEO of Adore Beauty, Sacha Laing, said:

Our first half result demonstrates the effectiveness of the early phases of our strategy refresh to improve Adore Beauty Group's quality of earnings and long-term profitability as we evolve over the next three years into a leading omni-channel beauty retailer. Our plans to open 25+ physical stores are on track and will deliver a material step change in our revenue growth and profitability metrics.

Adore Beauty share price snapshot

In the last six months, Adore Beauty shares are down by around 3%.

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Motley Fool contributor Tristan Harrison 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. The Motley Fool Australia has recommended Adore Beauty Group. 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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