Warpaint London plc (LON:W7L) has once again proven its ability to excel in a competitive market with its stellar H1 2024 results. The company’s impressive performance has exceeded expectations, making it clear why Shore Capital considers Warpaint a “House Stock” with significant potential for the future.
Strong Sales Growth and Profitability
The beauty brand’s total sales for H1 2024 grew by approximately 25%, reaching £45.8 million. This robust growth was led by Warpaint’s flagship brands, W7 and Technic, with W7 experiencing a 24.7% sales increase and Technic’s sales rising by 24.1%. Notably, Warpaint’s pre-tax profit surged by an impressive 75% to £11 million, surpassing the previous forecast of £9.5 million. This outstanding performance is supported by a jump in adjusted diluted EPS, which grew by 65% to 10.6p.
The company’s growth is expected to be even stronger in the second half of the year, with Shore Capital raising its FY24 pre-tax profit forecast by 5%, bringing the expected total to £24.5 million. This indicates EPS growth of more than 30%, which the analysts suggest may still be conservative.
International Expansion Fuels Success
Warpaint’s expansion across international markets is a key driver of its ongoing success. European sales, which represent 58% of the company’s total revenue, grew by an impressive 40% in H1. The UK market, responsible for 34% of sales, also delivered a solid 17% growth, driven by partnerships with major retailers like Tesco, Superdrug, and Boots. Notably, W7’s weekly sales at Boots are reported to have increased fourfold since the start of 2024.
Although US sales growth has been more measured at 3%, this has been a strategic move. The company has focused on profitable growth by reducing its presence in deep discount channels and improving its gross margin in the region by 12 percentage points. The second half of the year is expected to see higher sales in the US, including Warpaint’s first Christmas order with Walmart.
A Standout Gross Margin Performance
One of the standout achievements of Warpaint London has been its gross margin performance. The company’s gross margin increased by 330 basis points to 42.5%, largely due to the successful launch of new, higher-margin products and cost savings driven by economies of scale. The focus on profitable sales, especially in the US, has also contributed to this sustainable margin expansion.
Shore Capital analysts Darren Shirley and Clive Black highlight this as a key strength of the company, noting that Warpaint’s management team is successfully balancing growth with profitability.
A Bright Future Ahead
Warpaint London continues to demonstrate its ability to thrive in a competitive global market. With its expanding international presence, strong brand performance, and disciplined focus on profitability, the company is well-positioned for continued success. The analysts at Shore Capital forecast significant long-term growth, predicting adjusted EPS to reach 30.6p by 2026, reflecting a compound annual growth rate of 18.4% over the next three years.
Final Thoughts
Warpaint London’s performance in 2024 underscores the company’s potential for sustained growth and profitability. With a strategic focus on international markets, partnerships with leading retailers, and a commitment to maintaining healthy margins, Warpaint is undoubtedly a brand to watch. Shore Capital’s positive outlook reflects a bright future for the company as it continues to sparkle in the beauty industry.
