Adore Beauty Earnings Call Highlights Profitable Omnichannel Push

Adore Beauty Group Ltd. ((AU:ABY)) has held its Q2 earnings call. Read on for the main highlights of the call.

Adore Beauty Group’s latest earnings call struck a confident tone, with management emphasising record underlying EBITDA, robust customer growth and improved marketing efficiency. While acknowledging short‑term margin pressure from heavy promotions and higher lease and inventory costs, the company framed these as manageable trade‑offs in a strategy geared toward scalable, omnichannel growth.

Record EBITDA Underpins Improving Profitability

Adore delivered underlying EBITDA of A$4.1 million on a pre‑AASB16 basis, up 14.5% year on year and representing a 3.7% margin, or roughly 5.5% under the older reporting method. Statutory EBITDA reached A$4.9 million, showing the business is converting rising sales into higher profits even as it invests in retail and technology.

Revenue Growth Driven by Retail, Promotions and Brands

Group revenue climbed 8.7% to A$111.9 million, supported by the rollout of new physical stores and a strong promotional calendar. Growth in owned brands further boosted top‑line expansion, demonstrating that the company can grow beyond its original pure‑play online model and tap multiple levers to support sales.

Customer Growth and Cheaper Acquisition Boost Unit Economics

New customer additions surged 21.8% year on year while the cost to acquire each new customer more than halved to A$33, marking a sharp improvement in marketing efficiency. Overall marketing spend fell nearly 30%, and marketing as a share of sales dropped about 520 basis points to 8.6%, enhancing profitability per order.

Loyalty and App Adoption Deepen Customer Engagement

Adore’s rewards program now drives around 78% of sales, up from about 65% a year earlier, showing strong traction in recurring customer behaviour. Active customers rose 4.7% to 850,000, the contactable database grew over 14% to 1.35 million and the app’s share of online sales jumped to 35%, up from 25%.

Omnichannel Stores Deliver New Customers and Higher LTV

The company opened 10 stores in the half, taking its national network to 18 locations, and reported an impressive in‑store conversion rate of 11.1%. Around 30% of in‑store transactions came from new customers, and shoppers who use both online and stores show about 20% higher lifetime value than single‑channel customers.

Owned Brands Gain Momentum and Support Margins

Owned brands, including iKOU, posted strong revenue and profit growth across online and retail channels, validating the company’s brand‑building strategy. Management expects these higher‑margin brands to exceed 6% of group revenue by FY26, which should provide a structurally accretive lift to group margins over time.

Operational and Inventory Efficiency Continue to Improve

Inventory quality improved, with more than 60% of stock now within a 60‑day window and stock turns up 11.7% year on year, reducing working capital drag. The company is also using partnerships and AI tools to streamline picking and warehouse processes, helping lower labour costs and support scalable fulfilment.

Strategic Infrastructure Investments Set Up Future Scale

Adore has secured a 6,300 square metre national fulfilment centre in Broadmeadows, scheduled to go live in Q1 FY27 with automated picking and an initial A$8 million outlay supported by a dedicated facility. At the same time, it is rolling out a new ERP and custom AI platform designed to lift long‑term efficiency, accuracy and customer experience.

Solid Cash Generation Despite Heavy Investment

Operating cash flow of A$2.4 million in the first half of FY26 and a closing cash balance of A$8.2 million show the business remains cash generative even while funding store openings and acquisition‑related payments. Management highlighted that these investments are proceeding as planned, underpinning confidence in the balance sheet’s ability to support expansion.

Promotional Intensity Weighs on Gross Margins

Gross margin for the half was 35%, but management noted that it was about 120 basis points lower than it could have been due to outsized performance of Black Friday and Cyber Monday events. This heavy promotional mix created temporary margin pressure, which the company aims to address by rebalancing future promotional activity to smooth earnings.

Higher Lease Costs Reflect Expanding Retail Footprint

Rental expenses jumped from roughly A$665,000 in the prior comparable period to about A$2.0 million, reflecting the rapid expansion of the store network. This shift prompted Adore to emphasise pre‑AASB16 EBITDA to give investors a clearer view of underlying performance as lease liabilities, interest and related cash flows step up.

Inventory Levels Elevated but Under Active Management

Reported inventory was higher at period end, which management attributed to normal Christmas supply timing and the need to stock new stores appropriately. Despite the uplift, the company reiterated that inventory management remains a key focus, pointing to improved turnover and healthier stock ageing as evidence of progress.

Funding Options Under Review for Growth Agenda

With capital commitments to the fulfilment centre, ERP program and continued store rollout, Adore is assessing funding options to support its growth strategy. This signals that additional capital beyond current cash and existing facilities may be required, although management framed this as investment in clearly defined, payback‑oriented projects.

Store Maturity Timelines Temper Near‑Term Returns

Management indicated that new stores typically take 12 to 18 months to mature, with payback expected in one to two years, but timing can vary by opening date and seasonal quarter. As a result, recently opened stores may provide only limited near‑term earnings contribution, with more meaningful profit support emerging from their second year of trading.

Quarterly Margin Volatility Likely to Persist

The company cautioned that the concentration of sales during Black Friday skews half‑on‑half margin comparisons and can mask underlying progress. Investors should therefore expect some ongoing quarter‑to‑quarter margin variability as Adore fine‑tunes its promotional calendar while balancing growth and profitability.

Guidance Signals Confidence in Earnings and Scale‑Up Plan

Management guided to FY26 underlying EBITDA of 3–4% on a pre‑AASB16 basis, equivalent to about 5–6% under the prior methodology, versus 3.7% achieved in the first half. They expect owned brands to exceed 6% of revenue by FY26, target more than 1.25 million active customers by FY27, plan at least 25 stores by FY27 and aim to deliver key milestones such as the ERP launch in Q4 and Broadmeadows fulfilment centre in Q1 FY27.

Adore Beauty’s call painted a picture of a business transitioning from a pure online retailer into a scaled omnichannel platform with improving unit economics and disciplined investment. While near‑term earnings will face some noise from promotions, leases and inventory, management’s targets and infrastructure build‑out suggest a clear path to higher margin, cash‑generative growth for investors watching the stock.