Brand Architekts hurt by cosmetics tariffs in H1

By

Sandra Halliday

Published
Mar 10, 2020

Beauty specialist Brand Architekts Group announced its first-half results on Tuesday and said sales fell but margins rose. In the 28 weeks to January 11, it saw further growth in e-commerce sales with two major brands relaunched, and 99 new product lines launched.

But revenues declined by 15% to £10.6 million, “significantly impacted by a strong decline in international sales” at the firm that owns the Fish and Super Facialist brands. They were down 23% year-on-year as a result of currency devaluation in a key market, as well as tariff pressures.

Revenues were heavily impacted by the effect of increased tariffs on cosmetic goods shipped from China to the US, but the firm believes it’s “well placed to recover a large proportion of the affected USA business should the tariffs be reversed”.

It's interesting that the company mentioned tariff issues given that fashion retailer French Connection had said something similar on the same day. And in both cases, it could be taken as a warning to the UK government that it needs to act fast to ensure that Britain can strike a reasonable trade deal with the EU. If higher tariffs are denting the money British companies can make when they export to the US, imagine how much of an impact they would have for those companies that export to Europe, which is currently the biggest trading partner that Britain has.

Brand Architekts  wasn't only hurt by the effect of tariffs on exports though as its UK sales also declined by 13% year-on-year “impacted by a challenging retail environment”.

But “pleasingly, direct to consumer e-commerce sales recorded another period of strong growth reflecting a continued commitment to develop this particularly profitable channel by building engaging and precisely targeted marketing content”.

And the gross profit margin improved to 37.6% from 35.1%, helped by a focus on higher-margin brands and channels. 

But the firm’s underlying operating profit (before central costs) still fell to £1.6 million from £2.5 million. And while group pre-tax profit rose to £6.6 million from £0.7 million, this was due to the profit on the disposal of its manufacturing business (£8.8 million). It was offset by a loss on discontinued operations (including exceptional costs) of £2.5 million.

Executive chairman Brendan Hynes said: "The business is now through a challenging calendar year where the difficult market conditions, the distraction of the sale of the manufacturing business and significant management changes have all had an impact on results. Having now completed the operational transition to a fully focused branded business with a very strong balance sheet and appointment of a CEO with deep industry experience, the business is well positioned to build scale and deliver further profitable growth.”