Revolution Beauty profits rise to £3.9m despite 20% drop in sales

Revolution Beauty has reported an 18% rise in adjusted EBITDA to £3.9m for the six months ended 31 August 2024, despite a 20% drop in sales from £90.4m to £72.4m. The decline in group revenues were driven by the planned simplification of the product portfolio and the discontinuation of unproductive stock keeping units (SKUs). The decline also reflected significant stock clearance activity in the first half of FY24. However, the group reported improvement in underlying gross profit margin of 20bps. Additionally, its cost savings programme continues to be on track as its distribution costs decreased by 33% YOY and administrative costs decreased 30% YOY. The group’s marketing costs saw a slight increase of 2% YOY due to investment in brand marketing to underpin the future growth of core products. In H1 2025, the brand rationalised its portfolio from from seven brands across eleven categories to three brands across seven categories, with a core range of 1,058 SKUs. It also improved its service levels from c.70% to consistently over 90%. Furthermore, Revolution Beauty is encouraging progress with existing and new retailers. It signed a new agreement with DM Germany with a launch in 850 stores in January 2025. The group also expanded into 250 new Boots stores in the UK in October 2024. Looking ahead, the group reiterated its guidance that sales for FY25 are expected to decline year on year at a slightly lower rate than in H1, with a return to growth in the fourth quarter as several of the group's new strategic growth initiatives take effect, and this growth is expected to accelerate through FY26. With the continuing momentum in the underlying business, as gross margins strengthen in the second half of the year and as cost savings programmes continue to deliver, underlying adjusted EBITDA is expected to be at least in line with FY24 as previously guided, prior to the one-off stock provision announced on 9 October 2024. Lauren Brindley, group chief executive officer, said: "This is a year of transformation for Revolution Beauty, and our performance in the first half reflects the steps we have taken to position the Group for long-term, profitable growth. Since launching our new strategy in February, we have substantially cut a long tail of unproductive SKUs, improved our operational delivery and made good progress with our cost savings programmes. Consequently, we now have a core portfolio that is growing globally with a significantly improved underlying gross margin. "As we look to the second half and beyond, we have a strong pipeline of growth initiatives, including new and expanded retailer relationships, a reinvigorated pipeline of make-up innovation, the launch of our new Skincare range and the global expansion of our budget brand, Relove. As these initiatives start to take effect, we expect a return to growth in Q4 and anticipate that this will accelerate through FY26. With good momentum in the underlying business, I remain highly confident in the Reigniting the Revolution strategy and in our ability to become a top five mass beauty brand."