Brand Architekts sales set to slip as expected

22nd Jul 2024 09:39

(Sharecast News) - Beauty brand business Brand Architekts Group said in an update on Monday that it expected sales for the financial year just ended to be around £17m, aligning with market expectations but down from £20.1m in the 2023 period.

The AIM-traded firm said the decrease reflected its ongoing brand rationalisation programme, involving its exit from several underperforming and unprofitable brands.

That strategy, it explained, aimed to sharpen the group's focus on its margin-accretive brand portfolio, promising better profitability and growth potential.

Despite the decline in sales, Brand Architekts said it had made significant progress in reducing operating losses, achieving results in line with both the first half of the year and market expectations for the 52 weeks ended 30 June.

The improvement was attributed to enhanced operational efficiencies, particularly through more effective use of targeted advertising and promotions.

Additionally, the group said it had implemented strict cost control measures, including reducing staff costs and other overheads.

Those efforts had resulted in a healthier financial position, with the group retaining a net cash balance of around £7m at the end of the year.

The company's flagship brand, Super Facialist, experienced 14% growth, driven by distribution gains, particularly in Holland & Barrett in the second quarter.

It said the brand's design upgrade began to appear in stores during the fourth quarter, further supporting its growth.

Conversely, Skinny Tan faced challenging trading conditions due to the cost of living crisis and an unseasonably wet spring and early summer, impacting the premium self-tan category.

However, the introduction of an affordable gradual tanner, Body Glow, in major retailers such as Boots, Superdrug, Asda, and Tesco in the third quarter,had shown promising results, becoming the third fastest-growing value product in the UK.

Dirty Works expanded its presence by launching in 750 Watsons stores across nine countries in the second and third quarters, with encouraging sales results in markets like Thailand, Turkey, Malaysia, the Gulf, Singapore, and Hong Kong.

Meanwhile, The Solution menopause range launched its own website in June and planned to roll out to Amazon in July.

That brand saw a 30% increase in net sales, driven by the Bodycare launch in Waitrose and increased demand on Amazon.

Root Perfect, a key brand under the Harvest portfolio, continued to outperform last year's sales, fueled by strong demand in the UK for affordable hair colourants and expansion into Normal stores across Europe, as well as an improved pricing strategy in Morrisons.

Additionally, Super Facialist was set to introduce its new Vegan Collagen line and Sleep Smart Night Moisturisers in Boots in July.

Skinny Tan would also launch in Morrisons in July, and The Solution Haircare range was scheduled to debut in the UK in the third quarter of 2025.

Brand Architekts said it remained focussed on leveraging its developments to enhance its market presence and financial performance.

"The management team remains focused on realising both the strategic and financial aims of the group," the board said of the company's outlook.

"In line with its brand development strategic tenet, immediate priorities are on driving brand awareness on Super Facialist and Skinny Tan, with an expected year-on-year increase in digital awareness and acquisition campaigns - in particular with targeted investment in TikTok and Influencer marketing.

"Extensive new product development is in the pipeline for the second half, and in response to consumer demand, Skinny Tan will be relaunched as Skin & Tan in the half-year."

Brand Architekts said it expected to deliver revenue growth through international expansion, while retaining a keen focus on brand contribution and releasing working capital tied up in 'Harvest' brands.

"We remain confident that the foundations we are building will enable us to return to profitability and achieve our medium and long-term goals."

Brand Architekts said it expected to announce its full-year results for the 52 weeks ended 30 June in late October.

At 1141 BST, shares in Brand Architekts Group were down 2.34% at 28.32p.

Reporting by Josh White for Sharecast.com.