Adore Beauty records $200 million in revenue for the financial year, with 60% attributed to its loyalty program

Adore Beauty has this morning released its financial results for the 2021-22 financial year, with a record $200 million in annual revenue.

This figure is up 11% from the $179.3 million recorded in 2021, and a staggering 65% from $121 million in 2020, demonstrating considerable growth for the digital retailer during the pandemic thanks to the consumer shift to online shopping.

In its report released to the ASX, Adore Beauty said its loyalty program — launched March 2021 — has contributed to 60% of the total revenue.

Speaking to SmartCompany Plus earlier this year about the program, senior loyalty and retention manager Miranda Bliss said it had “definitely exceeded all expectations”, and that it was “something that Adore had been thinking about for many years”.

But it was the meteoric customer growth the business experienced in the first year of the pandemic that really sharpened its focus on the customer retention strategy.

“Adore was [previously] very focused on acquisition of new customers,” Bliss told SmartCompany Plus. COVID-19, however, helped the brand recognise it was more important than ever to focus heavily on the retention of these customers.

And such a realisation paid off, with the financial report demonstrating that more than 95% of Adore Beauty’s most valuable customers had signed up to the loyalty program, and that 70% of its revenue came from returning customers who shop more than three times a year.

There was 31% annual growth in returning customers (up 115% from the financial year 2019-20), which “reflects high retention of customers acquired during lockdowns”, the report reads.

Adore Beauty’s report also says that its growth in returning customers offset any decline in new customer acquisition, which resulted in a two-year active customer growth of 48%.

Alongside the loyalty program, Adore Beauty also released its own app, which now accounts for 11% of total revenue.

But the big moves don’t end there.

In June 2022, Adore Beauty also made the long-awaited move into the owned brand space with the launch of Viviology, its private skincare label.

CEO Tennealle O’Shannessy said in the report that the sales of Vivology had also exceeded internal expectations, with Adore on track to launch its second owned product offering later in the calendar year.

“Owned brands are an important pillar in our long-term growth strategy, providing future expansion opportunities in new geographic regions and distribution channels, and delivering improved margins,” O’Shannessy said.

On the up

Many digital brands are finding themselves scaling back operations after the rapid growth that the pandemic delivered.

But as the revenue report shows, this has not been the case for Adore Beauty, nor does the brand believe it will be facing such a fate in the future.

It does, however, acknowledge the inflationary pressures around employee, freight and marketing costs, and will be implementing cost control measures to actively manage such pressures.

Despite a current EBITDA margin of 2.7%, Adore reported that it does not expect to achieve an EBITDA margin of 2-4% in FY23. It still expects to remain profitable on a full-year basis, and that it will return to a 2-4% EBITDA margin for the full-year of FY24.

And moving forward, Adore Beauty expects the societal shift to e-commerce along with its own strategic initiatives — such as its owned brands — will help to increase its operating leverage and EBITDA margin expansion over time.

“Adore Beauty is targeting an EBITDA margin of 8-10% for the full year in FY27, with the mobile app and owned brands targeting contributions of 30% and 10% of revenue respectively,” the report reads.

Adore Beauty has also highlighted its interest in a merger and/or acquisition by the 2026-27 financial year in the report, as well as listing it as one of its ‘long-term targets’ alongside launching into new geographic regions.