High street retailer Lush has bought out its US partner to nearly double the size of its sales and has pledged to invest in rebuilding its UK operations which have been hit hard during the pandemic.
The Poole-based retailer, best known for its heavily scented bath soaps and handmade cosmetics, returned to profitability in its last financial year, according to accounts to be published at Companies House next week.
Lush co-founder Mark Constantine said the chain had taken over its North American partner, which would add more than 80% to its revenue as its biggest market. The transaction cost C$180 million, plus C$20 million in deferred payments, and was financed by the sale of assets and excess cash held by the US and Canadian companies.
However, Constantine said he canceled his activities in Russia after the war in Ukraine. The 48 stores in Russia and 15 in Ukraine are majority-owned by a Russian citizen and employ more than 600 people.
“There is no prospect of selling the business, as we have suspended the supply of products to Russia. No one knows what the future prospects are,” he said, adding that stores Ukrainians from Lviv and Dnipro could still open.
As of June 30, 2021, Lush operated through retail outlets in 48 countries and manufacturing facilities in six countries through subsidiaries, joint ventures, licensees and franchises. The total number of stores was 919, down slightly from the previous year.
The group recorded a pre-tax profit of £29m in the twelve-month period, rebounding from a loss of £45m the previous year. However, turnover fell to £408.7m from £437.8m.
Lush raised prices by about 7% before Christmas, which Constantine said would likely absorb rising inflation this year. “We don’t expect any further price increases in the UK,” he added.
Lush used furlough and other government aid of £21.9m in 2021 and £16.8m the previous year, while in the UK he also received a full year of rate relief worth £6.2 million. The fall in sales during the pandemic by around a quarter has led to a similar reduction in the workforce across the group.
Constantine said rivals selling beauty products, but also selling drugs, were allowed to open during recent lockdowns, “eating our lunch”. However, the company plans to invest in the business to grow it again, helped by lower rental terms on many of its properties.
Leases for around a fifth of UK stores have been renegotiated, with rents nearly halved to reflect the impact of the pandemic on the high street, he added.
But he said shops with landlords with “dogmatic views” on rental income had closed. Lush plans to invest in opening larger outlets with services such as spas and hairdressers to attract customers.
The company paid no dividends to its owners, including Constantine, who called such a move “inappropriate” given the government support used during the pandemic. “We need to invest money now. We need to redesign our stores. The group also continued its policy of charitable giving, with Lush raising £6.3 million in funds worldwide and donating £3.9 million to good causes.