Warpaint London, the AIM-listed cosmetics group behind W7, Barry M and Dirty Works, reported first-half revenue down 17.8 percent to £40.5 million from £49.3 million. Adjusted EBITDA fell 36.4 percent to £6.8 million and pre-tax profit 33.2 percent to £4.9 million. The shares fell between eleven and fourteen percent.
Gross margin rose 230 basis points to 47.3 percent.
Those two facts sitting together are the interesting part, and the explanation given for the revenue fall is the phrase worth extracting: weaker consumer spending, cautious retailer ordering, and the timing of customer orders.
Cautious retailer ordering is not the same thing as weak demand, and the difference matters enormously to anyone who sells through somebody else’s shelf.
Warpaint does not sell to shoppers. It sells to Rossmann, Tesco, Superdrug and Walmart, who sell to shoppers. When those buyers become uncertain, or when their own working capital gets more expensive, they order less often and hold less cover. The product still moves off the shelf at roughly the same rate. What changes is how much sits in the warehouse behind it, and that adjustment lands entirely on the supplier in a single half.
Which is why the margin going up while revenue falls is not a contradiction. Warpaint attributes the improvement to sourcing gains, new product development and a one-off benefit from Barry M inventory acquired at a discount. The company controlled what it could control.
Sam Bazini, the chief executive, said as much: the first half was challenging with pressure on consumer spending and cautious ordering across many markets, and the group remained focused on the areas within its control, improving gross margin, generating strong cash flow and positioning for growth.
The recovery evidence is in the third quarter. Sales are expected to rise about five percent to £28.5 million from £27.1 million, helped by Christmas gifting and further expansion with those same retailers. Nine-month sales are expected around £68 to £69 million against £76 million last year, which means the gap is closing rather than widening. The board expects full-year revenue toward the lower end of the £103.3 million to £112.6 million market range, with adjusted EBITDA still within the £22.4 million to £24 million range.
The balance sheet is doing fine work through all of this. No debt, strong cash generation, an interim dividend up 6.3 percent to 4.25p, and a share buyback of up to £2.5 million launched in July and due to complete by the end of September. Direct online sales rose six percent to £3.6 million and now represent 8.9 percent of group sales against 6.8 percent.
That last number is the strategic one. Every percentage point of direct sales is a percentage point where the ordering decision belongs to the person who actually wants the product.
Consumers kept buying. The buyers stopped restocking.
