Makeup supplier Warpaint London (W7L:AIM) has acquired value cosmetics brand Barry M for £1.4 million, expanding its retail reach.
Shares in the company were marked 2.5% higher to 205p after it guided for a modest uplift in FY25 revenue at improved gross margin.
| Share price: 205p (+2.5%) | PE: 9.6x |
| Market cap: £162m | Yield: 6% |
However, investors’ enthusiasm towards the W7 brand owner was tempered by guidance for a 12% year-on-year decline in adjusted EBITDA.
AIM-listed Warpaint blamed the downgrade on factors including a ‘challenging consumer and customer environment’.
Negative revenue impacts
Warpaint is now guiding to FY25 adjusted EBITDA of approximately £22 million. That represents a downgrade on the previous forecast for EBITDA in the £23.5 million to £25.5 million range.
The Buckinghamshire-based company blamed the earnings disappointment on the closure of Bodycare, a long-term customer of Technic.
This negatively impacted revenues. Other factors included ‘the challenging consumer and customer environment’ and business lost as a result of US tariff uncertainty. The latter stalled the firm’s momentum in the US.
On the positive side of the ledger, FY25 revenue is expected to show some growth despite testing market conditions. Management guided for a 3% rise in sales to roughly £105 million, below the £110.5 million forecast by Shore Capital.
That includes a £12 million contribution from February 2025 acquisition Brand Architekts, which delivered a profit in year one.
Warpaint, which also owns the Super Facialist and Dirty Works brands, successfully delivered a strong second half rollout programme into new retail outlets with the likes of Superdrug, Tesco (TSCO), Boots, Tigota and CVS.
Boost from Barry M?
Acquired out of administration and boasting annual revenues of £15 million, value cosmetics label Barry M looks a good fit for Warpaint.
It trades in a similar part of the market to the firm’s budget cosmetics brands.
Famous for the creation of white nail varnish, Barry M has significant distribution with major retailers including Superdrug, Boots, Sainsbury’s (SBRY), Tesco (TSCO) and Priceline Australia and also sells direct to consumers online.
Warpaint CEO Sam Bazini commented: ‘Looking ahead to the new year, we expect to see a return to organic growth across the group and also expect to be able to update the market on further significant new customer roll outs with our full year results in April.
‘In addition, we are delighted to announce today the acquisition of the Barry M brand, which is expected to accelerate our penetration into key UK retail channels.’
Warpaint is often cited as a beneficiary of the ‘lipstick effect’, the phenomenon where consumers continue to buy affordable luxuries like cosmetics during economic downturns.
However, given a recent run of earnings alerts, Warpaint isn’t as resilient a business as investors may have thought. FY25 results were heavily impacted by tough UK and European consumer markets and US tariff uncertainty.
While the shares are attractively valued on a single-digit prospective PE ratio for 2026 with a 6% yield, we would sit on the sidelines until the cycle of earnings downgrades has run its course.
Read the press release here: https://www.warpaintlondonplc.com/investors/rns-news
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