Shares in Warpaint London (LON:W7L) plunged after the cut-price cosmetics seller warned it expects FY26 revenue to be towards the lower end of consensus. The AIM-listed makeup supplier insisted current year adjusted EBITDA should fall ‘within the current range’ of analysts’ forecasts.
However, the firm’s FY26 performance will be ‘significantly more second half weighted’ than in prior years. And this means the firm needs to deliver a near-faultless H2 in order to meet full-year earnings forecasts.
Doing so could prove difficult given pressure on consumer spending and cautious retailer ordering across many of Warpaint’s markets.
Revenue warning
For the uninitiated, Iver-based Warpaint sells low-priced colour cosmetics and personal care products. Its brands include W7, Technic, Dirty Works, Super Facialist, Fish Soho and Barry M.
Management expects FY26 sales to come in towards the bottom of the £103.3 million to £112.6 million consensus range, while adjusted EBITDA should land between £22.4 million and £24.0 million. In FY25, Warpaint generated adjusted EBITDA of £21.3 million on sales of £105.1 million.
Encouraging signs in Q3
Warpaint’s H1 results were pretty disappointing. They revealed a 17.8% drop in revenue to £40.5 million following a challenging’ start to the year, while pre-tax profits fell by a third to £4.9 million.
| Six months to 30 June 2026 | H1 | Change |
| Revenue (£m) | 40.5 | -17.8% |
| Gross margin | 47.3% | +230bps |
| Pre-tax profit (£m) | 4.9 | -33.2% |
| Dividend (p) | 4.25 | +6.3% |
Source: Warpaint London, H1 results
The good news is trading has been ‘positive’ through Q3, with sales expected to be up 5% year-on-year at roughly £28.5 million. And there are some large customer orders and roll-outs that management is confident will land in H2, enabling the firm to achieve FY26 consensus.
Warpaint’s successful expansion with key customers is reflected in a pilot in 2,200 Rossman stores in Germany and a ‘substantially larger’ Christmas order secured from US retail titan Walmart (NASDAQ:WMT). The company has also launched an online Christmas gift range with Ulta Beauty (NASDAQ:ULTA) in the US.
Cash cushion
Despite the H1 decline in sales and profits, Warpaint raised the dividend by 6.3% to 4.25p, drawing confidence from its strong cash position.
‘Cash flow was a particular highlight,’ said broker Cavendish, ‘with net cash of £20.7 million, up £3.7 million year-on-year, driven by strong free cash flow of £6.3 million. Capex requirements remain low for the group and the strength in balance sheet provides optionality for management around capital allocation.’
Back in April, we urged investors to avoid Warpaint given the risk of further disappointments. Today’s revenue alert and share price reverse show we were right to be cautious.
Warpaint is often cited as a beneficiary of the ‘lipstick effect’. This is the phenomenon where consumers continue to buy affordable luxuries like cosmetics during economic downturns. Yet a series of earnings misses suggests Warpaint isn’t as resilient as previously thought.
Should hard-pressed consumers rein in spending over Christmas, there could be further downgrades to come. On the positive side of the ledger, Warpaint has a strong balance sheet with no debt. And the cosmetics specialist’s brands and customer relationships remain strong.
As CEO Sam Bazini explained: ‘We have made encouraging progress with a number of major retailers, including Rossmann, Superdrug, Tesco (LON:TSCO) and Tigota, ecommerce continues to grow, and the Barry M brand has been successfully integrated into the group.’
