‘Lipstick effect’ adds gloss to Adore’s debut

Investors delivered a healthy profit for the online beauty and make-up retailer’s sharemarket debut.

Investors delivered a healthy profit for the online beauty and make-up retailer’s sharemarket debut. Picture : Nicki Connolly

Adore Beauty co-founder Kate Morris believes the “lipstick ­effect” is proving true in the current downturn, as investors backed that theory by delivering a healthy debut profit on the online beauty and make-up retailer’s sharemarket debut.

The success of the float, which values Adore Beauty at just over $650m, has also proved the continued enthusiasm of investors for nimble, online businesses.

One high-profile investor to jump on board Adore Beauty is the multibillionaire co-founder and co-CEO of tech giant Atlassian, Scott Farquhar, whose family investment firm Skip Enterprises has emerged as holding just under 300,000 shares in the company, or about 0.3 per cent of the capital.

Ms Morris, who started the Melbourne-based Adore Beauty in her garage 20 years ago, first met Skip boss Kim Jackson, the wife of Mr Farquhar, several years ago.

Shares in Adore hit the boards on Friday at $7.40, or a 9.6 per cent gain on the IPO price of $6.75, and closed at $6.92, up 2.5 per cent.

Like many online retailers, the valuations are stretched as investors chase growth businesses. Adore Beauty is forecasting revenue for the calendar year of $158.2m and a net profit of $3.5m.

“I am looking forward to all the circus being behind us now and we can get back to work,” Ms Morris said. “First up, obviously we have got Christmas ahead of us and that is in full swing already. Christmas for online retailers kind of starts at the beginning of October and so we are right in the thick of that. “We have got our (mobile) app that is about to launch and a loyalty program that is due to launch early next year.”

Ms Morris said it was certainly the case that in times of poor economic growth, consumers spent on beauty and make-up, also known as the “lipstick effect”.

“Also skincare is the new lipstick — lipstick is less popular when you have to wear masks, particularly here in Melbourne — but I actually think beauty is much more about self care than it is about appearance,” she said.

“What people looked for ­particularly in lockdown is just ­little moments of feeling good, whether that was giving yourself a facial at home or taking a lovely bath with a scented candle.’’

Ms Morris and Adore Beauty co-founder James Height took out $92m from the float, with private equity firm Quadrant also making a handy profit as it sold down to 32.5 per cent. Ms Morris and Mr Height each retain an 11 per cent stake.

Adore Beauty was founded in 2000 by Ms Morris and Mr Height and has grown to become Australia’s No 1 pureplay online beauty retailer with more than 230 global and domestic brands and 11,000 products — some of which are available exclusively on its platform. Adore Beauty has a large and active customer base, having grown more than 278 per cent since 2016 to over 590,000 active customers today.