Sales and profits fall at Lush as costs bite

Lush Cosmetics experienced a mixed performance last year, with the company swinging to an operating loss driven by rising input costs and the relocation of dozens of stores.

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In the year to 30 June 2018, the British retailer saw brand turnover (including joint ventures, associates, licensees and franchisees) drop to £928m from £932m in the previous year, according to its latest accounts seen by Insider Media. But excluding wider brand revenue, the firm’s revenue jumped to £525m from £498m.

During the year, the company closed 111 stores in Japan and left the Brazilian market after failing to turn a profit for the four years it was operating in the country. This included the closure of five stores and a factory. Additionally, Lush relocated 27 group shops to bigger and better locations.

Higher shop premises costs, coupled with higher raw material and labour costs, meant a group operating loss of £4m, down from a profit of £22.7m in the prior year.

In official documents the company said:"Total brand turnover (including joint ventures, associates, licensees and franchisees) is marginally down (by 0.8%) on last year at £987.4m, although +3.3 per cent higher than last year at consistent exchange rates. Sales in our largest retail market of the US fell by 7.5% reflecting reduced levels of footfall during the year.

"Group operating profit before exceptional items has decreased by £26.7m, from a profit of £22.7m to a loss of £4m. The decline is due to our main costs increasing at a greater rate than our sales, namely cost of goods, shop and manufacturing staff costs, shop premises costs and sales and administration costs.

"We have continued our relocation programme, moving 27 group shops to bigger and better locations which have in some cases incurred significant pre-opening costs recognised as an expense in the year.

"These new locations have broadly met our sales expectations and there is a learning curve in managing these bigger shops, in the control of staff costs and being flexible enough to react to the peaks and troughs of customer visits."

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