Warpaint London, the company behind popular cosmetics brands W7 and Technic, has released its 2019 financial results. Despite a decline in profits, the company achieved a 1.6% increase in group revenue, reaching £493 million. International revenue also experienced growth, rising by 8.3% to £26.6 million, mainly driven by the EU market with an impressive growth rate of 26.5%. However, the gross profit margin dropped to 33.5% due to lower-margin US sales and adverse exchange rates.

The company’s core brands, W7 and Technic, performed well, with export sales increasing by 8.6% year-on-year. Excluding the US business and on a constant currency basis, the gross profit margin actually improved to 39% from 36.9%.

Although Warpaint London reported a profit before tax of £1.8 million, down from £4.7 million in the previous year, Chairman Clive Garston described the performance as “satisfactory” and expressed optimism for the current trading year. Garston highlighted the successful launch of the W7 range in Tesco stores and ongoing discussions with other major retailers as positive developments.

However, Garston acknowledged the impact of the Covid-19 pandemic on the company’s operations. The subsequent lockdown measures resulted in a significant reduction in sales as many retail outlets had to close. Warpaint London has prepared for various trading scenarios but remains cautious in its estimates. The company believes it has enough financial stability to withstand disruptions for at least the next 12 months.

In 2019, sales of branded color cosmetics accounted for 80% of revenue, with W7 contributing 46% of the total. Challenging trading conditions on the UK high street, along with Brexit uncertainty and a winter election, affected consumer spending patterns and shopping behavior. Despite these challenges, the company implemented a strategy in the UK to boost sales of the W7 brand in the medium term. The recent successful launch of the W7 brand in Tesco stores is seen as a positive indication of this strategy, although it has been impacted by the Covid-19 pandemic.

While the UK market posed difficulties, the W7 brand continued to grow in Europe with a sales increase of 21%. However, the US market experienced a decline of 11% in sales, partially due to the collapse of Forever 21 in September 2019. Sales in the rest of the world also dropped by 18%, with declines in Puerto Rico, China, and New Zealand. However, there were increased sales in other markets, including Australia, Peru, and South Korea.

The impact of Covid-19 on Warpaint London has been significant, resulting in the cancellation, reduction, or deferral of orders. However, the company has noticed a gradual improvement in orders from customers in all regions. Nonetheless, overall performance still falls short of pre-Covid-19 expectations, and it is too early to provide guidance for the future.

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