A 14% lift in new customers and a finished NDC reshape the margin story heading into next year
Adore Beauty (ASX:ABY) has finally given the market something concrete to anchor a recovery thesis to. The trading update for the 47 weeks to 24 May shows revenue up 7.4% to $193.4 million, new customer acquisition up 13.9%, and FY26 underlying EBITDA tracking to around $4 million.
Those are not blockbuster numbers in isolation. What gives them weight is the FY27 guidance attached to them. Adore Beauty’s CEO Sacha Laing is now pointing to revenue growth of at least 10% and underlying EBITDA of $9 to $13 million next year.
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For a stock that listed at $6.75 in 2020 and has spent five years in the wilderness, doubling or tripling EBITDA in a single year would mark the first real proof that the omni-channel pivot is more than a cost line. The market has heard turnaround stories from this name before, so the question now is whether the FY27 setup is genuinely different.
We think it might be. The reasons are mechanical rather than aspirational, and that matters.
The capital cycle is ending, and that is the real story
Adore is calling FY26 the most capital-intensive year in its 26-year history. The company has rolled out 14 Adore Beauty stores and 3 iKOU stores, swapped out its core ERP platform, integrated the iKOU acquisition, and built a new National Distribution Centre.
All of that lands on the FY26 P&L as cost and disruption. None of it shows up properly in earnings until FY27. The NDC alone is flagged to save around $2 million in annualised labour costs, and a recent Head Office restructure is delivering another $2.5 million in annualised savings.
Add those two cost-out levers to a $4 million EBITDA base and the $9 to $13 million FY27 range stops looking heroic. It starts looking like arithmetic.
The customer acquisition number is doing quiet work
New customer acquisition up almost 14% year-on-year is the line investors should sit with the longest. The legacy bear case on Adore was always that COVID-era customers did not stick and that reacquiring them got more expensive every year.
If the retail stores are now feeding the online channel with new customers at a lower blended cost, the unit economics of the whole business shift. Laing was explicit on this point, calling the network a cost-effective way to introduce customers to the brand.
The skeptical read is that promotional intensity in April and May tempered Q4 trading, so some of that customer growth came with a discount attached. We would want to see Q1 FY27 confirm the trend once the rollout pause begins.
What the gross margin tells us about the brand mix
H2 gross margin held at 34.5% despite the discounting cycle. That is the second number worth dwelling on. It points to the higher-margin own-brand and iKOU contribution starting to offset the squeeze from third-party promotional activity.
If iKOU continues to scale and the store network keeps tilting the mix, FY27 should see gross margin push higher even before the NDC efficiencies flow through. That is the operating leverage management has been promising since the strategy reset.
The Investors Takeaway for Adore Beauty
The setup into FY27 is the cleanest Adore has presented to the market in years – if not ever. Capital spend rolls off, two named cost-out programs flow through, the store network keeps feeding new customers, and the brand mix is shifting toward higher margins. If management hits the midpoint of the $9 to $13 million EBITDA range, the stock is no longer a turnaround. It is an early-cycle growth retailer with a credible margin path.
Our concern is that the macro is still doing real damage to discretionary beauty spend, and management itself flagged uncertainty in the outlook commentary. The FY27 number leans on cost-out as much as growth, so the revenue line needs to hold above 10% for the full range to be reachable. Investors who want the longer history on how Adore got here can read our previous coverage at stocksdownunder.
The next test is the FY26 full-year result and the Q1 FY27 print that follows. If new customer growth holds above 10% and gross margin nudges higher, the re-rating case writes itself.
