Adore Beauty
Hi guys Are you able to provide an update on ABY following your meeting with them a few weeks ago?
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Answer
Hi Mark,
We had Adore management through post results and a few points to make. The business is doing well in terms of top line sales growth, the issue is around the margins being achieved that are lower than originally expected. They suggest this is because of greater spend to take advantage of the opportunity (I’m sceptical) while they say margins will benefit from the launch (shortly) of their private label. (which I agree with).
The most telling aspect for me, is that Quadrant, when they originally bought into the business before listing it on the ASX, paid around ~1x sales at the time, ABY has just done sales of ~$180m going to ~$205m in FY22 and they are back trading at ~1x sales growing at ~16% with a market cap of ~$200m. Their major comparable on the ASX is Temple & Webster (TPW) which is trading of 2x sales that are growing at ~30%. Clearly, we have got this one wrong however I’m not a seller at these levels.
