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STOCK WATCH: What’s Driving Adore Beauty’s +100% Share Price Surge?

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By Published On: August 17, 20220 Comments

The ASX has issued Adore Beauty with a price query following its sudden surge on Tuesday. Is Temple & Webster to blame / thank?

In the last 30 days, pureplay retailer Adore Beauty has experienced 123.4% growth in its share price, closing at $2.20 on Tuesday (up from $1.68 the previous day).

So, why the sudden lift? While its own full-year results aren’t being announced until 29 August, it seems it has experienced an anticipatory surge in share price, thanks to Temple & Webster’s gains.

In fact, the ASX issued the company with a price query following its share price surge from a low of $1.68 to a high of $2.26 on Tuesday. Adore responded by saying that it doesn’t have any information to explain the lift. The company did, however, point to Temple & Webster’s strong earnings result, which could be behind Adore’s rally. “Adore Beauty is not aware of whether or not the results of TPW explain the recent trading in Adore Beauty shares,” Adore said in response to the ASX price query.

The furniture retailer’s shares have skyrocketed in response to its FY22 results announced on Tuesday. Temple & Webster closed at an impressive $5.71 on Tuesday, up 25.2% in the last 14 days (ironically not seeing as much lift as Adore Beauty). For context, it closed at $4.40 on Monday. Investors clearly responded well to its announcement, which included news that revenue lifted 31% on last year to $426.2 million and an EBITDA of $16.2 million (and a margin of 3.8%). Revenue growth was driven both by higher customer numbers (active customers jumped 21% to 940,000) and higher revenue per active customer (up 6%). While its net profit before tax of $13.2 million was down on FY21, it does have a cash balance of $101.1 million.

In an upgrade on its FY22 guidance, Temple & Webster is forecasting an EBITDA margin of between 3% – 5% in FY23, as well as predicting a return to double-digit growth.

ASX Listed E-Com Index

Source: ASX Listed E-Com Index based on ASX reporting for the period

Adore’s surge is also interesting in the context of the announcement that Tennealle O’Shannessy would be departing as CEO, moving on as CEO and MD of the ASX-listed IDP Education Limited in February 2023.

“On behalf of the Board and all of the Adore Beauty team, I would like to thank Tennealle for her outstanding leadership and contribution during a particularly challenging couple of years,” read an announcement from Adore Beauty Chair Marina Go. “As CEO, Tennealle has done an excellent job delivering Adore Beauty’s financial and operational successes, including exceeding all Prospectus forecasts, and leaves the business well-positioned for future growth.”

While its share price initially experienced some volatility in the immediate wake of the announcement, it has clearly made a fast recovery, soaring to new highs and up 54.4% in the last week.

In its response to the ASX price query, the company also noted that it was informed that the Woodson Funds have an economic interest in 14,190,323 million Adore Beauty shares through a combination of physical and synthetic holdings and that it has sought clarification from the Woodson Funds regarding the nature of its holding. Adore Beauty is not aware of whether or not Woodson intends to further unwind its synthetic position and/or acquire additional Adore Beauty shares.

Temple & Webster’s gains were Adore Beauty’s too, it seems, though not all online retailers benefited from the company’s FY22 results and FY23 outlook. Kogan closed 2.3% down over seven days, after a period of strong performance, and Booktopia shed 10.8% to $0.29. BikeExchange is also down 4.5% over the same period.

Cettire is also up an impressive 38% over seven days to $1.04 (rivalling Adore Beauty’s longer-term growth, up 172.4% over 30 days). Unlike Adore, however, it was already on this upwards growth trajectory prior to Temple & Webster’s announcement, at $1.03 at close on Monday. It is also not due to release its FY22 results until the end of August, and there don’t appear to be any specific company announcements that could account for its growth. Whether it is an anticipatory lift ahead of its earnings announcement or uplift of the e-com and tech space generally remains to be seen. The luxury fashion retailer does keep its cards close to its chest, so it’s hard to know exactly what to expect as we head to the end of August.

While Redbubble has been on a growth trajectory (up 35.3% over 14 days), the release of its FY22 signalled a swift change in direction. As at the time of writing, it has dropped from $1.495 at open to $1.02 in the wake of its results. Notably, it reported a EBITDA loss of $11.2 million, down from $52.7 million year-on-year. It also reported an NPAT loss of $24.6 million, compared to a profit of $31.2 million in FY21. In response to its net loss, shares immediately fell, shedding over 31% before midday.

If the last 24 hours are anything to go by, we can expect further volatility on the E-Com Index as we head to the end of the month.

Figures are current as at close of ASX on 16 August 2022. This is analysis only and not intended as investment advice.

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About the Author: Natasha Scholl

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