Despite a “strong” financial result, this retailer is being sold down heavily

Adore Beauty Ltd (ASX: ABY) shares are being smashed on a profit result its Chief Executive has characterised as “strong”.

The company said in a statement to the ASX on Tuesday that it had posted record underlying EBITDA of $4.1 million for the first half of the year, up 14.5% on the prior corresponding period.

In a separate release, however, the company says net profit was down 69.9% to $189,000, while sales increased markedly, from $102.9 million to $111.9 million.

Investors clearly didn’t like the numbers, pushing Adore Beauty shares 23.3% lower to 66 cents, not far off their 12-month lows of 61 cents.

Management positive on the outlook

Chief Executive Officer Sacha Laing said regarding the result:

Adore Beauty has achieved a strong financial result in the first half of FY26, benefitting from our maturing customer-led strategy. We cost-effectively acquired new customers at the fastest rate in four years whilst halving acquisition costs with record levels of marketing efficiency. Importantly, operating leverage, growing owned brands, and disciplined cost management delivered record earnings despite margin pressures arising from exceptionally strong Black Friday period sales. We stepped-up our omni-channel rollout during the half, opening 10 stores since July with a further six in the pipeline for the remainder of CY2026. While more than half of these stores opened in the final months of CY2025, we are already seeing the benefit of our retail network on customer acquisition and brand awareness.

Ms Laing said while retail conditions remained 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”.

The company said it had opened its first stores in both Queensland and South Australia during the first half, with all of the new stores expected to reach maturity in 12-18 months, and make a meaningful contribution to the business from the second year of operation.

The group’s loyalty program now has 509,000 members, contributing 78% of sales in the first half, Adore said.

The company said regarding this:

‘Adore Rewards’ is structured to reward frequent and repeat purchasing behaviour, increasing engagement and share-of-wallet while supporting marketing efficiency. The Adore Beauty app is another driver of marketing efficiency, accounting for 35% of online sales during the period, up from 25% for the same period last year. The strong performance of loyalty and app continues to improve quality of revenue, offsetting the reduction in promotional cadence.

The company also said it had secured a lease for a new major national fulfilment centre, which would unlock material operating efficiencies from the second half of FY27.

Adore Beauty was valued at $80.8 million at the close of trade on Monday.

The post Despite a “strong” financial result, this retailer is being sold down heavily appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England 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.