The Adore Beauty Group Ltd (ASX: ABY) share price is in focus after the company announced a trading update for the quarter ending 31 March 2023.
Adore Beauty is Australia’s largest online retailer of beauty products.
Adore Beauty Q3 update
The business announced that it generated $41.3 million of revenue, a decrease of 3.3% year over year (compared to the FY22 third quarter). But, it was up 4.9% compared to two years ago, the third quarter of FY21.
Adore Beauty said that its active customers – customers who have ordered in the last 12 months – amounted to 793,000. This was a 10% reduction year on year, and down 3% compared to two years ago. The company said that this reflected the churn of year-one customers, and slowed new customer growth.
But, the customer base includes 483,000 returning customers. This was an increase of 56% on a two-year basis, and up 6% on the prior corresponding period.
Adore Beauty also revealed that its mobile app is seeing increasing average order value and returning customer frequency. The mobile app now accounts for 23% of total revenue, up from 18% in the first half of FY23.
Management comments
Adore Beauty CEO Tamalin Morton said:
Adore Beauty’s revenue improved as the quarter progressed, benefitting from a record Afterpay Day. Our mobile app and loyalty program are already contributing strongly to revenue, and we are leveraging additional opportunities to drive adoption and sign-up. These initiatives support customer retention and deliver higher, more frequent average orders.
Adore Beauty is well-positioned to navigate evolving consumer trends and challenging retail conditions given cost-of-living pressures and interest rate increases, offering an extensive range that spans masstige through to luxury brands and price points to suit all budgets. Separately, cost optimisation initiatives are being implemented and we are working through our longer-term strategy.
While we are focused on delivering short-term targets, as the leader in a resilient category benefitting from structural tailwinds, Adore Beauty’s long-term outlook looks promising.
Final thoughts on the Adore Beauty share price
It was going to be hard for the business to deliver growth compared to last year now that COVID is no longer causing lockdowns or trading restrictions.
I think the business has a promising long-term outlook, but I’m not expecting strong revenue growth in the next year or two. However, the online model could help the company’s margins in the coming years as it becomes bigger.
I think it’s one of the ASX growth shares worth monitoring as an opportunity.
