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Why are Adore Beauty shares charging higher today?

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Happy woman looking in the mirror and applying cosmetic with a big brush.

Shares in Adore Beauty Ltd (ASX: ABY) piled on more than 7% on Monday morning after the company announced a positive trading update to the market.

Strong trading result

In a statement to the ASX, the company said that despite challenging conditions, its FY26 revenue for the first 47 weeks of the year was up 7.4% to $193.4 million compared to the previous corresponding period.

Year to date, new customer acquisition was up 13.9% while the company’s gross margin was expected to be in line with the prior year at 34.5%.

Adore Beauty also opened three new stores during the first half, bringing its total to 14 Adore Beauty stores and 6 iKOU stores.

Chief Executive Officer Sacha Laing said regarding the result:

More pronounced cost-of-living pressures have seen an increase in promotional activity in the market through April and May resulting in a tempered slowdown in trading in Q4. Pleasingly the Group is expecting to achieve gross margins for H2 in line with the prior year, achieved through our higher margin own brands and store network. While we are benefiting from new growth levers, including our loyalty program, higher-margin retail network and iKOU brand, we will not see the full benefit of these initiatives until next financial year. Store performance is in line with expectations with our retail network continuing to cost-effectively introduce new customers to the Adore Beauty brand, increase revenues, and support our online channel through new customer acquisition.

Adore Beauty said the recent period had been the most capital-intensive in its 26-year history, with investment in new stores, the acquisition of iKOU, the replacement of its core enterprise resource planning (ERP) system, and investment in AI capability.

Future looking bright

The company also issued guidance for FY27, saying the group expected revenue growth of at least 10% and underlying EBITDA of $9 to $13 million.

Mr Laing said regarding the near future:

Our large infrastructure projects remain on budget and on schedule with the ERP transition expected to be completed in the coming weeks and commissioning of our new National Distribution Centre (NDC) on track for the first quarter of FY27. Both will support a material step-up in efficiency and customer experience, with the NDC saving approximately $2 million in annualised labour costs. In addition, we have recently reshaped our Head Office team delivering over $2.5 million in cost efficiencies on an annualised basis.

Mr Laing said the company would open another four Adore Beauty stores and one iKOU store during the first half of FY27.

Adore Beauty shares were 7.8% higher at 34.5 cents mid-morning on Monday.

The company is valued at $30 million.

The post Why are Adore Beauty shares charging higher today? 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 no position in any of the stocks mentioned. 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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