Adore is now wildly promising EBITDA margins by 2028 of greater than 10 per cent, putting it well beyond even the margin of best-of-breed retailer JB Hi-Fi. Adore will (fail to) do this by growing its owned brands to 15 per cent of total sales. Chief executive Tennealle O’Shannessy will never have to deliver this margin expansion because she’s off to more lucrative pastures at IDP Education. And who could blame her?
Also on Monday, just after noon, embattled skincare empire BWX requested and was granted a suspension of its shares from trading until September 30. The skincare company advised it was “not in a position to issue its audited full year results for [financial 2022]” just 24 hours before it was scheduled to do so.
This was “due to certain revenue recognition issues for FY21 and 1H22 … These matters mean the company is currently unsure whether or not it will meet its full-year guidance for FY22 …”
To translate for our readers, the company here is saying it is stomach-sinkingly certain it will not meet its full-year guidance for FY22. It will also have to restate its previous accounts.
In the parlance of class action law firms and the enforcement division of the Australian Securities and Investments Commission, these are commonly referred to as “accounting irregularities”.
BWX is terrifically exposed given it tapped the market for new capital in August 2021 (at $4.85 per share) and again eight weeks ago while these “issues” were afoot. The share price is now suspended at 63¢.
Let’s hope the board’s class action insurance policy is up-to-date and platinum-plated.
On June 28, BWX slashed its FY22 earnings guidance and launched its emergency capital raising, explaining that “when we provided a trading update in May, our plans assumed selling into and holding a certain level of inventory with select wholesalers and retailers in June. The challenging market conditions have caused us to change our approach.”
Again in plain English, BWX was stuffing its sales channels like a turkey. That is, BWX would’ve been shifting inventory to its wholesalers and recognising the revenue despite those wholesalers having no obligation to pay for that stock unless and until their own customers bought it (to varying degrees of aggression, this is common practice in the retail sector).
And, alas, they never bought it.
Given BWX is now flagging the restatement of its FY21 accounts, this was occurring way before May and June.
BWX’s market capitalisation is now $125 million, though will plunge when new accounts are lodged. The company will almost certainly be in negative equity, owing its major partner Zoë Foster Blake (and friends) something like $90 million (in cash) for the remaining 50 per cent of her Go-To Skincare it is compelled to purchase from 2024.
Maybe Adore Beauty’s not such a bad prospect after all …
