Covid disruptions and JobKeeper ending see losses mount

The global chain might be a cosmetics juggernaut overseas but here its losses have worsened as it chases a slice of the $11bn makeup market.

Sephora’s losses in Australia have worsened. Pictire: AAP/Brenton Edwards

Global cosmetics chain Sephora, owned by French luxury giant LVMH, has witnessed a blow out in its annual losses to almost $28m in Australia as it was struck with the disruptions caused by Covid-19 and tens of million of dollars in JobKeeper payments and rent reductions dried up.

While it might be considered a trailblazer in the cosmetics realm with the hefty backing of the world’s largest luxury goods group, since Sephora arrived in Australia with its maiden store in 2015 to grab a share of the local $11bn make-up and beauty sector it’s sales have flatlined and its grand store opening ambitions reined in.

Latest accounts filed by Sephora Australia reveal a business that has, like many retailers, been hit by the volatility unleashed by the pandemic and lockdowns with customer demand, supply chains and staffing all impacted.

And one of the biggest holes punched in the accounts was the end of the JobKeeper program which in calendar 2020 saw Sephora Australia pocket $8.46m in government wage subsidies but that go to zero for 2021. In 2020 as the pandemic raged and shopping centres were in lockdowns Sephora drew $2.048m in rent reductions but in 2021 landlords were less amenable to rent deals and that also went to zero.

Sephora Australia’s losses, burdened by disruptions and the end of wage and rent subsidies, blew out to $27.933m in calendar 2021 against a loss of $7.873m in 2020 and a net loss of $4.5m in 2019.

Sales have remained flat for the global cosmetics retailer in Australia, with it posting sales of $190.9m in 2021, against $191m in 2020 and down from $226.3m in 2019.

Sephora Australia’s local directors drew attention to the impact of Covid-19 on their business in the directors’ report, as business activity, supply chains, customers and staffing was all affected.

“The outbreak and the response of Governments in dealing with the pandemic interfered with general activity levels within the community and the economy for the majority of 2021 with major lockdowns experienced through the months of July to October 2021 impacting retail outlet closures.

“Following the Covid-19 outbreak, the Company has continued its business operations. The business has sustained disruptions to the supply chain, availability of employees and changes in customer demand.”

Backed by French giant LVMH that is known for its luxury brands Louis Vuitton, Givenchy and Bulgari, Sephora Australia has been forced to rely on the ongoing financial support from the French parent and a letter of financial support for directors to sign off on the latest Sephora Australia accounts.

Sephora has 22 stores in Australia and is part of its international reach which includes roughly 1,900 stores in 29 countries worldwide. When it first opened in Australia it was met with huge crowds and excited local shoppers, while for cosmetics retailer rivals such as Myer and David Jones it threatened to up-end their hold on the make-up category.

Sephora recently announced it would open its 23rd store in Australia with a new site in Brisbane at Indooroopilly shopping centre.