Lush Fresh Handmade Cosmetics Financial report FY23

8th May 2024

For the year ended 30 June 2023

The Directors present their Strategic Report on Lush Cosmetics Limited (the “Company”) and its consolidated subsidiaries and associates (together, the “Group”) for the year ended 30 June 2023.

Principal Activities
The Group’s principal activity is the manufacturing and retailing of fresh handmade cosmetics.

At the 30 June 2023, the Lush Brand operated through retail outlets in 51 countries and manufacturing facilities in 6 countries through its subsidiaries, associates, licensees and franchises. The total number of permanent shops at 30 June 2023 was 857 (2022: 886) of which 668 were in Group subsidiaries (2022: 656). The Group’s subsidiaries and associates are listed in Note 26 to the accounts.


permanent shops, total

Review of Business, Results comparison

The comparison of our results is again complicated by the acquisition of our North American joint venture in the previous financial year (on 28 September 2021) which significantly increased the size of the consolidated group. Up to the date of acquisition this joint venture was accounted for under the equity method with the Group’s share of its profit presented in the profit and loss account as a single line item and the share of its net assets presented in the
balance sheet as an investment. Since the date of acquisition and as a fully owned subsidiary, the North American business has been consolidated into the Group results on a line-by-line basis in accordance with the purchase method of accounting.

In order to provide a like for like comparison of our performance and position we have made adjustments to the reported 2022 results to reflect the North American business as if it were part of the consolidated group for the full financial year; these adjustments are summarised in the table below. This reflects a different approach to last year’s comparison in which we adjusted the 2022 results to exclude the accounting impact of the acquisition to enable a
consistent comparison with the 2021 results. The change in approach is due to the fact that the North American business was fully owned for the whole of the 2023 financial year and 9 months of the 2022 financial year; management’s view is that the most appropriate like for like comparison with 2022 results is to assume that the North America was fully owned for the whole of 2022. This approach is also consistent with the internal management reporting during the 2023 financial year.

The table below summarises the results of the Group for 2023 and compares to 2022 on an ‘as reported’ basis (consistent with the profit and loss account on page 40) and on an ‘adjusted Group comparative’ basis which reflects North America as if it were controlled for the full 2022 financial year, as described above.

Results overview
Brand turnover (Group turnover as reported plus turnover from associates, licensees and franchises of £108.9m) in the year was £816.8m which is a decline of 2.3% on 2022 (as reported) and a 6.5% decline when converted at consistent exchange rates.

Group turnover of £708.1m represents a 7.8% increase on 2022 on an ‘as reported’ basis. However the more meaningful comparison is against the adjusted 2022 comparative as shown in the tables above; this shows a 0.5% increase on last year but the underlying decline is -3.8% when converted at consistent exchange rates. Group like for like turnover (as defined under ‘key performance indicators’) was -4.0% being the net of a 0.9% decline in our stores
and a 17.5% decline in our Digital turnover.

Whilst it was disappointing to record a drop in Group turnover (when converted at consistent exchange rates) for the year we were encouraged by a steadily improving trend over the course of the year; combined Group Retail and Digital turnover suffered a decline of -6% in Q1 followed by -5% in Q2, -1% in Q3 and growth of +2% in Q4. The first half of the year saw a continuation of reduced consumer sentiment due to inflationary pressures that have impacted most of our markets. Whilst this undercurrent continued in the second half of the year our turnover was boosted by the
reopening of borders in our Asian markets which increased footfall in Japan, Hong Kong and Macau and also by the success of our brand collaboration with ‘Super Mario Bros the Movie’ during this period.

The Group turnover performance is weighted by our North America markets of the US and Canada which accounted for 44% of total Group turnover but also recorded the most significant decline of -10%; this is partly due to a more significant decline in Digital turnover than our other main markets as a result of a continuing decline in website traffic. As with our other main markets the North America turnover trend did improve through the course of the year finishing at -3% in Q4.

Our second largest market of the UK recorded growth of +2% in the year which was a strong performance given it has probably suffered most severely from inflationary pressures and the cost of living crisis, exacerbated by the disastrous and short lived Truss administration in the Autumn of 2022; the growth was helped hugely by recording the highest ever turnover in the month of December which underlined our strength as a Christmas brand in the UK. In
our other main Group markets there was healthy growth in our Asian markets of +13% whilst Australasia grew by +4% and Europe +1%.


Brand turnover, FY23


Group turnover, FY23

Group EBITDA as reported in FY23 (financial year ended 30 June 2023) was a profit of £2.1m which is £29.7m lower than last year; based on the adjusted Group comparative EBITDA is £30.8m lower than last year. The underlying decline in EBITDA is more severe when you take into account differences in accounting adjustments relating to onerous leases (favourable movement of £13.5m) and one-off accounting adjustments relating to the North America
acquisition last year (£9.2m). Taking these factors into account, the underlying decline in EBITDA (based on the adjusted Group comparative) is £53.5m.

The underlying EBITDA decline was due to increases in cost of goods, staff costs and some operating costs and Covid related benefits in FY22 (financial year ended 30 June 2022) that did not recur in FY23. Our cost of goods was impacted by a dramatic increase in our raw material costs at the beginning of the year; key materials such as glycerine, citric and bicarb saw an 11% increase mainly driven by suppliers passing on their increased costs around energy and commodity prices. Staff costs throughout the business increased mainly reflecting the annualisation of pay awards
and recruitment in the latter half of FY22 as we emerged from the pandemic period. Similarly, costs increased in travel, meetings and events which reflected the start of ‘back to normal’ physical meetings, attendance and participation at major events such as the South by Southwest (SXSW) conference and festival.

On an ‘as reported’ basis, the group operating loss and loss before tax show declines of -£29.7m and -£31.4m respectively; based on the adjusted Group comparative the declines were -£25.6m and -£24.8m respectively but the underlying declines are more severe for the same reasons as explained above in respect of Group EBITDA and also impacted further by a £2.9m favourable movement in fixed asset impairment adjustments and £1.8m one-off accounting adjustments relating to the North America acquisition last year.

Post Balance Sheet Event
On 4 January 2024 the Group became aware that it had suffered a ransomware attack. A National Cyber Security Centre Level 2 assured cyber incident response provider was engaged in response, and relevant authorities informed – including the Information Commissioner’s Office. There was some disruption to staff activity, but the Group promptly recovered systems and restored data from its backup repository.

A number of internal assets were stolen / encrypted, though subsequent forensic testing showed that there was no risk
to the Group’s E-commerce, Retail and Digital Fulfilment environments – including to customer data held in those
environments. No customer payment card information was affected.

Whilst the incident has now been fully mitigated from a forensic analysis and security risk perspective, the overall financial impact of managing the incident cannot yet be fully estimated. However, the directors are confident that the incident will not materially affect the operations or the financial statements of the Group.


Despite the challenging environment in 2023 we remain optimistic that the momentum gained during the year and our Master plan goals will continue to drive sustainable growth.

The three main goals of our not so secret ‘Lush Cosmetics Master Plan’ remain:

  1. Make products for every need.
  2. Be number one in every category.
  3. Create a cosmetic revolution to save the planet.

Overarching these goals is our mission to Leave the world Lusher than we found it and we believe that this mission and our goals will help to accelerate our growth and reach whilst we maintain our focus on what customers really want and what they care about.

Our product led approach offering cosmetic products with no harmful preservatives and that our customers can trust to protect their skin, hair, body and minds remains a key part of our plan, as does reminding customers of what we believe in, what we stand for and how we operate so that their love of our brand is reignited and they are reminded what makes Lush and our products so special.

When looking at our potential for growth and our ambition to be number one in every category the opportunities are enormous. Our Brand sales are still less than 0.25% of the Global Cosmetics industry and we aim to strengthen turnover in all categories through the following priorities:-

Doing what matters most to us. On Black Friday 2021 we launched our ‘Global Anti-Social Media Policy’ which is our pledge to stop posting on Facebook, Instagram, TikTok and Snapchat throughout the Lush brand until significant changes are made by these platforms.

When we made the decision to finally come off those Social Media platforms that refused to acknowledge or adjust for the dangerous impact of their algorithms on teenager mental health we knew it would impact our business. At the time we estimated that this might be £10m in turnover but it could well have been £10m in profit or 10% of our £800m brand turnover (£80m). We simply don’t know. The manipulation of those same algorithms renders it impossible to know what might have happened anyway. As many businesses have found, particularly smaller ones struggling to be seen and with smaller budgets to pay for visibility, it is those who generate the most clicks and revenue for the social media platforms, and who pay the most, that the algorithms favour. Whatever the figure for Lush, we remain proud of and committed to our stance and until we are convinced that proper actions have been taken to protect young people on these platforms we will not be returning to them.

We will instead continue our focus on reinvigorating our staff and customers through a more human approach with community activities, more meaningful, inclusive campaigns and on spreading our charitable giving to a wide spread of human rights, animal rights and environmental causes.

Be Somewhere Else written over a bath tub, showing the need for wellbeing over social media

Pioneering on ways to care for the planet. As described in more detail in the Impact Report within our Directors’ Report, our Climate and Nature Strategy outlines a To Do list of actions needed as part of our revolution to save our planet. To quote the environmentalist David Brower, “There is no business to be done on a dead planet”. We continue to drive towards our goals of 100% renewable energy throughout our business and to become carbon positive through insetting models rather than offsetting i.e. reducing CO2 emissions in our own supply chain rather than buying carbon offsets.

New shops, products, concepts and collaborations. Our approach is not just about adding new shops or upsizing them for growth but really focusing on what ranges are available in which stores to optimise the customer experience and to ensure that every store can offer a product for every need and present these products in the best possible way. By honing our core product ranges with further curation in those stores that can accommodate additional product, the aim is for store managers to be able to adapt their offering to their local customers at the same time as being able to highlight and display new concepts and seasonal ranges when needed.
Following their acquisition by the Private Equity firm Aurelius, it has been heartbreaking to watch the waves of store closures and job losses at The Body Shop as administrators moved in to run their UK business and they filed for bankruptcy in the US, Canada and other markets. Another Private Equity firm appeared to be eyeing up L’Occitane as they halved the number of stores in New Zealand, while Yves Rocher have closed their stores in Switzerland,
Germany and Austria and Sephora have announced that they are coming out of Korea. Big changes throughout the industry but we remain flexible, agile and invested in growing our retail presence; and optimistic that we can build back.

We also remain very committed to physical retail and continue to move quickly when the most exciting opportunities arise. Our brand-new anchor (an anchor being a large store in a key location offering most of our products and concepts) for Glasgow Buchanan Street is a great example of this. Moving into the most iconic building on the busiest shopping street in Scotland, this store (opened in December for 2023 Christmas trading) provides the perfect pitch with 1,769 square metres of space to house our shop and spa.

Post year end, in the eight months up to 29 February 2024, we have opened 14 new shops and completed 8 “upsizes” or relocations. We are also investing in our existing larger stores to improve the layouts for our customers and staff and to remind them of our ethos and environmental achievements with clearer messaging.

As well as investing in our stores we are also investing in our e-commerce and focusing on bringing our digital operations to top of class, with aims to bring our Lush Lens (an App that provides customers with key product information usually found on packaging or signage) to peak form and usage and our Lush Pay tills integrated with stock management systems to enable seamless supply for our customers and staff.

Our drive for a cosmetic revolution continues to focus on setting the best possible standards throughout our business operations. We believe a modern form of capitalism can co-exist with profitability; that we can operate high standards of business alongside our aspirations to become a real living wage payer globally, to become carbon positive through insetting rather than by offsetting our excesses, to become zero waste with Bring it Back deposit schemes globally that treat packaging like gold, by paying our suppliers fairly and working with them to ensure they can operate to the highest standards to protect and, where possible, regenerate the planet. Along with these areas of focus, by continuing to support good causes and organisations through our charitable giving, and by paying our fair share of taxes rather than operating in ways to minimize our liabilities, we will continue to strive for these better standards and hope that others will follow.

Employees, Engagement and Diversity

Staff costs % – Staff costs across the business is our largest overhead and is reviewed on a monthly basis (by territory and by discipline) to identify variances against prior year and forecast and take subsequent action if necessary.

Net cash – We review our actual and forecast cash balances regularly ensuring that we have sufficient cash reserves going forward and are also maintaining comfortable headroom against the loan or overdraft facilities available to us.

Living Wage
We continue to pay above the government minimum wage (on average by +10%) in all our group markets, whilst making progress towards our aspiration to be a Real Living Wage employer globally. This entails ongoing research into credible external organisations in our overseas markets similar to the Living Wage foundation in the UK. Currently we are officially paying the Real Living Wage in the UK (both in our Retail and Manufacturing operations), Ireland and in New Zealand; we also pay an estimated real living wage in Czechia and Hungary. In the UK we implemented an increase of 10.1% in April 2023 which is the highest in the 11 years of the Living Wage Foundation, reflecting the sharp increase in the cost of living, an annual investment of £4.4m.

We invested a further £1.2m in our wage rates in Germany which increased by 15% during FY23 and we have continued to pay a premium on this rate to our staff. Spain also saw an 8% increase in the government minimum wage and we were able to offer our staff a 3% premium on top of this, and in France there was a 2% mandated rise and we maintained our premium of 50 cents on top of this.

Equity, Diversity and Inclusion (E,D&I)
The Group is committed to inclusive values and behaviours, practising equity, and diversifying the business. We continue to take a collective approach to actioning ‘All Are Welcome Always’ and Lush becoming the Company we want it to be.

Part of our commitment to equity, diversity and inclusion is to understand diversity across the global Lush businesses. We have now moved to a localised approach with our commitment to regularly measure diversity at Lush, targeting our large markets of the United Kingdom and Ireland, United States and Canada. We will be working towards additional demographic data reporting in 2024. The reporting will include demographic information across age, gender, sexual orientation, race and ethnicity, religion and belief, disability and chronic illness, neurodiversity and educational background.

Full and fair consideration is given to applicants for employment from disabled persons where they have the appropriate aptitudes and abilities and to the continued employment of staff who become disabled. The Group encourages the continuous development and training of all employees and, wherever possible, the retraining of employees who become disabled for other positions within the Group.

Community Networks (employee resource groups) continue to grow and evolve, enabling employee participation in ED&I direction and sharing valuable insight into employee engagement and feedback with the business. The UK & Ireland Community Networks run by yearly term to ensure diversity of representation, and rotation of the Chair role for each of the networks. The first term started in September 2021, and we are postponing the next term to begin in 2024, with a look to restructuring employee resource groups and embedding a mentorship and development programme as part of the Chair role. The North America Community Networks launched in 2023.

The words "Lush Employee Benefit Trust" are written inside of a heart. To the right of this are the words "10% employee owned" in large black lettering

Employee Benefit Trust
10% of our shares are held on behalf of our staff in the Lush Cosmetics Ltd Employee Benefit Trust (EBT). We believe the Trust, which was established in 2017, will protect the prosperity of the Lush business and the company ethics through the Lush Ethical Charter, while recognising the contribution our employees make to its success. The EBT has grown in size, profile and trust within the business and is developing to successfully fulfil its intended purpose for the business and our staff.

This year, we welcomed Poland, Taiwan and Norway into the Lush Group, making all employees in these countries beneficiaries of the Lush EBT. The total number of beneficiaries continues to sit at around 12,000 people in 27 countries and our total number of EBT Representatives is 827 – democratically elected by the staff through company wide elections.

The EBT and its representatives play a pivotal role in championing our values, facilitating two-way communication between all Group colleagues and the business providing vital, timely insight into staff sentiment while encouraging equal opportunity for contribution in our mission to leave the world Lusher than we found it. We enjoy continued engagement through our first staff only publication ‘The Lush Insider’, regular operational and performance updates and direct communications from leadership through a multitude of in-person and digital channels including all-staff events which continue to ensure knowledge and information is shared directly with all colleagues.

The Trust board continues to be composed of two company appointed Trustees, two staff-elected Trustees and one independent Trustee. One of our staff-elected Trustees reached the end of their term this year, and another was subsequently elected to the Trustee board through our election process, increasing international representation across two continents, Europe and Australasia. To maintain experience on the Trustee Board we continue to ensure appointments are staggered, and our next staff Trustee election is scheduled for 2025.

We are still in the development stages of our Employee Ownership journey. We continue to build on our knowledge and experience to further develop our Employee Benefit Trust and employee ownership culture at Lush with the aim of effectively representing employee voice and preserving Lush’s ethics and independence. The intention is that the EBT will be offered re-issued shares by the Company to replace cancelled shares sold back to the Company from the shareholders when they wish to sell them, with those shareholders currently active in the business having agreed to a valuation method using the higher of net asset value or a multiple of five times the average post-tax profits of the last three financial years. Over time a future EBT shareholding of 35% is envisaged.

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