The Adore Beauty Group Ltd (ASX: ABY) share price is plummeting after the company released a third-quarter trading update this morning. In early trade, the beauty e-tailer’s shares are trading 9.83% lower at $4.13.
Let’s take a look at how the company has been performing.
Third-quarter highlights
According to Adore Beauty, third-quarter trading has remained strong, with revenue up 47% on the prior corresponding period to $39.4 million. This was driven by solid customer retention and re-engagement rates for new customers acquired during the COVID-19 lockdown period. A strong performance came out of core categories including skincare and hair care.
The update also confirmed the company’s FY21 revenue growth range of 43% to 47%, an uplift from its pre-COVID revenue growth of 38.6% in FY19.
Adore Beauty CEO Tennealle O’Shannessy commented on the results, saying:
The business is making strong progress on our strategy to leverage our online market leadership to further capture market share in a large and growing market. We continue to make disciplined investments in our mobile app, loyalty program, content capabilities, range and adjacency expansion opportunities and private label development. We look forward to updating investors further at our inaugural full year result presentation in August
The ‘significant opportunity’ for Adore Beauty
Adore Beauty has highlighted the significant online opportunity at hand within the beauty and personal care (BPC) market in Australia. The company estimates that the BPC market in Australia is worth approximately $11.2 billion with an expected compound annual growth rate (CAGR) of 26% to 2024.
Online sales currently comprise 11.4% of the BPC market in Australia, a lower penetration rate than in more developed markets such as the United Kingdom, United States and China. As a pure-play online beauty retailer, the company believes there is a significant opportunity at hand to capitalise on the structural shift towards online retail.
Adore Beauty’s strategy remains focused on growing its market share through investments to drive brand awareness, new customer acquisition and returning customer retention.
Adore Beauty share price struggles since listing
The Adore Beauty share price is significantly lower than its listing price of $6.75 and debut price of $7.42. Adore Beauty listed during a period when several other initial public offerings (IPOs) also struggled to make headway after listing. These included ASX shares such as Zebit Inc (ASX: ZBT), MyDeal.com.au Pty Ltd (ASX: MYD) and CleanSpace Holdings Ltd (ASX: CSX), all of which slumped lower after listing.
Another headwind facing Adore Beauty shares has been the recent weakness across ASX e-commerce shares. E-commerce peers including Kogan.com Ltd (ASX: KGN) and Redbubble Ltd (ASX: RBL) have been slammed in recent weeks following a period of tough comparables against supercharged FY20 figures driven by pandemic lockdowns.
While Adore Beauty has reported solid year-on-year growth figures, its shares are arguably swimming against the tide as the broader e-commerce sector is sold down.
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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited. The Motley Fool Australia has recommended CleanSpace Holdings Limited and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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