Lush ends ‘exceptional’ year
Ethical cosmetic brand Lush has reported exceptional results for their 2014-15 financial year, with brand sales accelerating 26 per cent to £574 million.
Strong like-for-like growth of 22 per cent has been achieved via the combination of its store estate and digital outlet, driving sales growth of 21.4 per cent and 27.8 per cent respectively. Despite Lush’s sales growth, profit figures were negatively influenced by currency volatility, particularly in Brazil – profit before tax dropped £900,000 on last year. Further dampening profits, exceptional costs in Japan heavily impacted group operating profit, plummeting by £9.2 million on last year.
Store portfolio management remains a key focus of its strategic initiative, focusing on prime sites with larger selling space. The brand increased its store numbers to 933 in the financial year, having opened 93 shops and closed 58 throughout the year – UK current store numbers stand at 106, including its 9500 sqft flagship on Oxford St which opened in April 2015. Striving for higher turnover and basket sizes, 115 of its stores now have the ability to generate annual sales of over £1m, a 46 per cent increase in two years.
Lush’s triumph stems from the growing number of consumers requiring cruelty-free and sustainably sourced cosmetics and skincare, which is in-turn enhanced by Lush’s capability in ensuring its staff can offer a high level of product knowledge and customer service in store.
Lush has a way to go before reaching its 25 per cent online penetration rate, having increased marginally by 0.1 per cent to 8 per cent in its full year 2015-16, marginally outperforming the UK health & beauty market in 2015 estimated at 7 per cent. Online growth is far more challenging compared to sectors such as clothing, with lower prices and the essential nature of products driving traffic to stores, while consumers also like the instore experience and customer service element – especially in skincare items.
While its two largest markets, US and UK, experienced resilient like-for-like growth of 37.2 per cent and 38.8 per cent respectively, its performance in Japan continued to disappoint at -11.2 per cent for the full year, with its turnaround remaining Lush’s greatest challenge. However, group sales for Q1 2015-16 have continued with an outstanding performance in both physical and digital outlets, up 21.7 per cent and 26.5 per cent, demonstrating the brand’s growing appeal among its loyal shoppers and strength in acquiring new customers.
- Rebecca Marks is analyst at Verdict Retail.