Lush posts huge loss but hopes SpongeBob SquarePants and Barbie deals can turn fortunes around
Lush slipped to a loss of almost £30m despite its turnover passing £700m and the success of its tie up with the popular Super Mario Bros movie, it has been revealed.
The ethical cosmetics retailer has posted a pre-tax loss of £28.1m for the year to June 30, 2023, having made a profit of £3.3m in the prior year.
The Dorset-headquartered company has also reported a turnover of £708.1m for the period, a rise from £657.1m, according to newly-filed accounts with Companies House.
However, Lush said that new deals with the SpongeBob SquarePants and Barbie brands is helping to boost sales in its current financial year.
Lush added that comparing its results to prior years was “complicated” by the acquisition of its North American joint venture in September 28, 2021, which “significantly increased the size” of the group.
The joint venture was fully owned by Lush for the whole of its latest financial year and nine months of its prior 12 months.
With the joint venture added into its financial results for the whole of 2022, Lush’s turnover rises to £704.5m for its prior year and it goes from making a profit to a loss of £3.3m.
Lush also said that instead of its reported turnover of £708.1m, a “more meaningful comparison” would be against its adjusted 2022 result which shows a 0.5 per cent increase but an underlying decline of 3.8 per cent when converted at consistent exchange rates.
Super Mario Bros helps Lush but North American sales falter
A statement signed off by the board said: “Whilst it is disappointing to record a drop in group turnover (when converted at consistent exchange rates) for the year we are encouraged by a steadily improving trend over the course of the year.
“The first half of the year saw a continuation of reduced consumer sentiment due to inflationary pressure that have impacted most of our markets.
“Whilst this undercurrent continued in the second half of the year our turnover was boosted by the reopening of borders in our Asian markets which increased footfall in Japan, Hong Kong and Macau and also by the success of our brand collaboration with Super Mario Bros the Movie during this period.”
Lush added that while its group turnover is weighted towards the US and Canada, at 44 per cent of its total, it also recorded the most significant decline of 10 per cent.
The company said this was “partly due to a more significant decline in digital turnover than our other main markets as a result of a continuing decline in website traffic”.
Lush added: “Our second largest market of the UK record growth of two per cent in the year which was a strong performance given it has probably suffered most severely from inflationary pressures and the cost of living crisis, exacerbated by the disastrous and short-lived Truss administration in the autumn of 2022.
“The growth has helped hugely by recording the highest ever turnover in the month of December which underlined our strength as a Christmas brand in the UK.”
Lush’s results also show that there was a 13 per cent rise in its sales in Asia, four per cent in Australasia and one per cent in Europe.
At the end of its latest financial year, Lush operated in 51 countries and had manufacturing bases in six.
Its total number of permanent shops stood at 857, down from 886.
Lush’s retail sales increased from £505.2m to £576.2m but its online takings dipped from £109.6m to £107.3m and its manufacturing revenue went from £40.7m to £24.3m.
During the year the average number of people employed by Lush increased from 12,704 to 13,034.
SpongeBob SquarePants and Barbie
On its trading during the first quarter of its new financial year, Lush said it has “continued the improving trend of FY23” with its turnover rising six per cent.
It added: “Turnover in all of our markets was boosted by successful brand collaborations with SpongeBob SquarePants and the Barbie movie.
“We recorded quarterly growth in North America for the first time since we fully acquired the business (four per cent), strengthening our belief that the steady deterioration in turnover since the peak can be reversed.”
Lush added that it has seen a five per cent increase in the UK and a 23 per cent rise in Asia.
However, Lush said that trading during its second quarter has been mixed “with some territories struggling to build on the momentum of the previous quarter”.
In the eight months to the end of February 2024, Lush has opened 14 new shops and completed eight “upsizes” or relocations.
Lush hit by cyber attack
In January 2024 Lush was hit by a ransomware attack which resulted in disruption to its staff while a number of internal assets were stolen.
Lush said that while “the incident has now been fully mitigated from a forensic analysis and security risk perspective, the overall financial impact of managing the incident cannot yet be fully estimated”.
However, the company added that “the directors are confident that the incident will not materially affect the operations or the financial statements of the group”.
Collapse of The Body Shop ‘heartbreaking’
In its latest results, Lush also described the collapse of The Body Shop earlier this year into administration as “heartbreaking”.
The company added that there are”big changes” being brought in throughout the retail industry but that it remains “flexible, agile and invested in growing our retail presence.
Lush also said that it is “optimistic” that it ca “build back”.