Brand Architekts Group, a beauty specialist, has released its first-half results showing a decrease in sales but an increase in margins. Despite experiencing growth in e-commerce sales and introducing new product lines, the company’s revenues fell by 15% to £10.6 million in the 28 weeks leading up to January 11. This decline can be attributed to a significant drop in international sales, which decreased by 23% compared to the previous year. The decrease in sales was primarily due to currency devaluation in a key market and the imposition of tariffs on cosmetic goods shipped from China to the US. These tariffs had a heavy impact on Brand Architekts’ revenues.
The company, however, remains hopeful and believes it can recover a significant portion of its affected US business if the tariffs are revoked. This optimism is shared by other companies, such as French Connection, who also expressed concerns about tariffs on the same day. It highlights the need for the UK government to take immediate action in securing a favorable trade deal with the European Union. If higher tariffs are already affecting British companies exporting to the US, the impact on those exporting to Europe, which is currently the UK’s largest trading partner, could be even more severe.
In addition to the impact of tariffs, Brand Architekts also experienced a decline in UK sales, which dropped by 13% year-on-year due to the challenging retail environment. However, the company noted that direct-to-consumer e-commerce sales continued to exhibit strong growth. This growth can be attributed to the company’s efforts in developing this profitable channel through engaging and targeted marketing content. The company’s gross profit margin also improved, reaching 37.6% from 35.1%, thanks to a focus on higher-margin brands and channels.
Despite these positive developments, the underlying operating profit (before central costs) decreased from £2.5 million to £1.6 million. While the group’s pre-tax profit increased from £0.7 million to £6.6 million, this was primarily due to the profit gained from selling its manufacturing business for £8.8 million. It was offset by a loss on discontinued operations, including exceptional costs, amounting to £2.5 million.
Brendan Hynes, the Executive Chairman, acknowledged the challenges the company faced in the past year, including difficult market conditions, the distraction of selling the manufacturing business, and significant management changes. However, Hynes expressed confidence in the company’s future prospects. He believes that the company is now well-positioned to achieve further profitable growth and expand its scale, especially since it has completed its transition to a fully focused branded business, has a robust balance sheet, and has appointed a CEO with extensive industry experience.