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British beauty brand Revolution Beauty was valued at close to a cool £500 million when it floated on London’s junior stock market AIM in July 2021. What’s happened since, with its boardroom in chaos and the company in open conflict with some of its major investors, has alarmed other shareholders and raised broader questions over investment in beauty in the UK.
However, speaking to Vogue Business, Millie Kendall, chief executive of the British Beauty Council, is quick to dampen down concerns. “[The UK] has a good global reputation for beauty,” she says. “It’s known for its creativity and innovation, which I feel is fundamental to market resilience.”
Analysts are also reasonably sanguine. “This level of corporate spat in the public eye is never a good look, and it will do little to assuage ongoing shareholders’ concerns about how Revolution Beauty has been run,” says Susannah Streeter, head of money and markets for investment company Hargreaves Lansdown. “But even this severe boardroom discord is unlikely to halt other plans in the pipeline.” Russ Mould, investment research director at investment platform AJ Bell, agrees, calling the debacle “unedifying” but adding that neither its financial nor operational missteps should have any impact on the wider industry.
How Revolution Beauty alarmed investors
So, what went wrong at Revolution Beauty? Founded in 2014 by Adam Minto and Tom Allsworth, the company bills itself as the home of “affordable cruelty-free beauty”, with fast-changing lines promoted heavily through social media. Its prices start as low as £1 and it’s known for its dupes — products that closely resemble, at least superficially, premium products. Its net sales reached £184.6 million in 2022, up 35 per cent year-on-year.
Alarm bells were first sounded when company auditors BDO raised concerns about its accounts last year. Revolution Beauty’s annual results for 2022 were not published, and the company’s shares were suspended from AIM in September.
A subsequent independent investigation found a litany of problems, including personal loans made by the co-founders to a distributor without the board’s knowledge, a sales overstatement of £9 million, and questions raised about the company’s acquisition of another business, Medichem, owned by co-founder Allsworth. Allsworth resigned as non-executive chairman of Revolution Beauty in June; Minto resigned as CEO in November 2022, and was replaced by Bob Holt. The share price surged briefly following the lifting of the suspension in late June, but has since plunged back down.
Last month, fast fashion retailer Boohoo, which has a 26.6 per cent stake in Revolution Beauty, was among the three-quarters of investors who voted to remove three key members of its executive team: Holt, CFO Elizabeth Lake and chairman Derek Zissman. The investors argued that Revolution Beauty needed to “switch to growth… with [a team who have] the right retail, e-commerce and consumer brands experience is required to deliver shareholder value”. Boohoo proposed instating new directors: Neil Catto, former CFO and executive director at Boohoo Group, and Alistair McGeorge, non-exec chairman of the Original Factory Shop and chair of the board of Retail Trust.
However, the three former execs were rapidly rehired by Revolution Beauty, which issued a statement referring to Boohoo’s actions (as the biggest single shareholder) as “hostile”, and “value-destructive, opportunistic and self-serving, as well as not being in the interests of the company’s shareholders as a whole”.
The public spat between the two companies has since continued, with Boohoo claiming on 28 June that Revolution Beauty’s rehiring of Holt, Lake and Zissman means its board of directors is “entirely comprised of directors who have appointed each other, whose appointments have not been approved by shareholders”, and who were “validly removed from office at a duly convened shareholder meeting”. It later issued a statement questioning a £2.1 million payout handed to 18 members of Revolution Beauty’s management team, including Holt and Lake, and accusing the company of a “lack of transparency”. Another meeting, requisitioned by Boohoo, will be held in late July or early August.
In turn, Revolution Beauty says that it “fundamentally disagrees” with Boohoo’s view that the board did not act in the best interests of shareholders, saying the situation could have easily been avoided if Boohoo had “acted in a manner consistent with corporate governance best practice… rather than embarking on a public and hostile board takeover campaign.”
The power struggle follows two years of disappointment for investors, who have seen Revolution Beauty’s share price plunge since the flotation. Hargreaves Lansdown’s Streeter notes that the share price — 34.5p at the time of writing, compared to 160p at flotation — remains “deeply depressed”. Revolution Beauty declined to comment.
Industry reassurance
The spat is a blow to a sector that’s already faced numerous challenges, as the combination of post-lockdown recovery and Brexit has caused logistical and financial difficulties, according to a 2023 report from the British Beauty Council and Oxford Economics, Value of Beauty.
Their analysis shows that growth has been hampered by new value added tax (VAT) systems and weaker exports and trade barriers in the form of administrative complexities and paperwork, while foreign brands no longer see the UK as a portal to continental Europe. Staffing shortages persist across the sector after the freedom of movement of EU nationals to the UK ended with Brexit.
Kendall of the British Beauty Council says Revolution Beauty — with its low prices and dupes — is not representative of what the British beauty space is generally known for, which lessens the impact of this debacle. “Aside from the respective businesses involved, there are people and personalities that will exacerbate this kind of dispute,” she adds.
Kendall argues that the beauty sector is resilient. “We have a specific niche here in the UK,” she says, indicating the popularity of expert-led brands such as Pat McGrath Labs and Charlotte Tilbury — the latter sold to Puig for a rumoured $1 billion in 2020. Other expert-led brands, such as Hair by Sam McKnight and Josh Wood Colour, are bright spots, she says. She also cites the promising emergence of natural brands, such as Haeckels, which secured a minority investment from Estée Lauder’s corporate venture capital arm NIV in 2022. A number of British brands, such as The Inkey List and Fable Mane, are reporting strong sales in the US.
AJ Bell’s Mould agrees. “Warpaint London continues to thrive — and its shares trade at five-year highs,” he says, noting that British high street retailers Next and Boots “continue to flag beauty as an area of strong trading”. Brits are still enthusiastic beauty shoppers, despite prolonged inflation and the skyrocketing cost of living. “Some put this down to the so-called ‘lipstick effect’, whereby consumers buy themselves less costly treats that provide happiness and comfort rather than much bigger, more expensive luxury items. It’s a trend usually seen during tougher economic times,” says Mould.
The UK prestige beauty market was valued at £1.2 billion in the period from January to August 2022, a year-on-year increase of 21 per cent, according to market research firm Circana (formally the NPD Group). Australian beauty retail giant Mecca has chosen the UK for its first step into global markets. LVMH-owned Sephora returned to the UK in early 2023.
Ambitious founders, creative solutions and more avenues for retail can help the bounceback. Streeter of Hargreaves Lansdown says: “Online and high street fashion names are becoming omnichannel outlets, offering a wardrobe of brands and a cupboard full of beauty lines to keep eyes browsing their sites and stop drift elsewhere. It’s become a trend for retailers to snap up slices of other companies, or shake on third-party deals to expand their empires.”
That’s all well and good when both parties agree on business strategy. In the case of Revolution Beauty, that dynamic went wrong big time — and the story is far from over yet.
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