would Warren Buffett invest here?

ABY needs the current core business to be profitable to enable expansion and compete into new markets.

The price is right but the profitabilty not there yet.

risk vs reward

I think the thesis for any buyers of Adore would have to be it is not Myer and Myer will fail. 

Some notes from comparing the two:

• Websites look almost the same.
• They have many of the same products.
• Prices are the same.
• Both provide free deliverly over $49 though Adore is express at this price, therefore, more expensive for Adore. However, Myer purchases can be exchanged in store which is an extra bonus on their side.

Looking at market captialisation of both:

Myer - $266 million, net cash at 1H21 of $201m gives an EV of $65 million.

Adore - $415m, net cash at 1H21 of $25m gives an EV of $390m.

Looking at those valuations is why I make the statement Adore's only advantage as an investor over Myer is the fact it isn't Myer. Younger buyers would likely just think of Myer as an older persons store and not look before buying. If Myer were to create a new website and brand selling the same product what would be the difference between that new brand and Adore? 

It is no wonder Adore share price is around half the IPO price when you compare it to Myer. Myer you are getting the whole rest of the retail business for free (which may be fair given its performance!) and at 1/6 of the price....

All thesis are made to be broken – I know this from university days when I remember thinking I had the perfect paper, to be told…not so much. Oh, and unfortunately from many investing ideas, some have also been well broken which is only visible after the fact. 

To Adore. Despite Adore offering a more focused experience than “shopping for price” at Amazon or one of the competitors, I think this is up for more competition, especially with changing buying preferences. 

More thinking about it Kate Morris really is the face of the brand. As previously highlighted, there is risk of her departure and while I am certain they believe this can be managed, it will likely be much harder than they think. Some brands are intrinsically linked to the founder. Being flippant to make a point, think about if the Colonel were to leave KFC. 

I have also conducted “research”. Less scientific than was included in my aforementioned university thesis I will admit, however, I have been consumers their opinion. To date I have canvassed 19 ladies in the 20-30 age group, admittedly not much of a sample size. That said, not one had a long-term relationship with the brand, and a quarter had made zero purchases. 

To date Adore has only counted for a small holding for me. I’m now out.  

Using the mantra of buy a small parcel as it focuses your attention, I am glad the parcel I purchased was only small.

Thoughts on management. The new CEO is a first time CEO, although extensive managemnet consulting and experince advising CEO's. 

Financial Controller is also new to the business, however, has held previous listed company Fin Conrol roles including at CCL.

The co-founders still appear to be well engaged with the company, although sitting on 100M following hte 25% sale to Woolworths, I always wonder how the motivation continues. It's your baby I understand and Kate Morris remains the face of the business. 

They claim they are different to other retailers as they know beauty. I know nothing about beauty so I'll assume that is accurate. 

Spent a bit of time on the website (which I didn't like the UI) and product compared against Amazon. I am sure I'm not the only one that would do the same thing. Online once I identyfy a product it simply comes down to availability and price. Unfortunately Amazon is pretty good at both.

I like they have almost zero debt, but the amature announcement blunders recently make me re-think my holding. As it's only a small parcel I'll continue to hold. 

Adore Beauty delivers a record half, ahead of prospectus forecast

Key H1 FY21 Performance Highlights

•  Revenue of $96.2m was 8% ahead of prospectus forecast of $89.0m2 and up 85% on PCP, driven by strong customer growth and continued high customer retention;
•  Record half with multiple record trading days including Afterpay Day in August, and Cyber Weekend in November, these promotions were 100% brand funded;
•  Active customers increased to 777k, 7% ahead of prospectus forecast and up 82% on PCP3;
•  Gross profit margin of 32.5% was up 1.4 percentage points on PCP, underpinned by product margin expansion; ? EBITDA4 of $5.2m was 58% ahead of prospectus forecast of $3.3m and up 188% on PCP; increasing EBITDA margin from 3.5% in PCP to 5.4%, ahead of prospectus forecast of 3.7%; and
•  $25.9 million cash as at December 31, with no debt

Online beauty retailer Adore Beauty Group Ltd (ASX: ABY) has updated its revenue forecast for the first half of FY21 to $95.2 million, a 7% increase on the prospectus forecast. “We are pleased to report strong sales ahead of our Prospectus forecasts. The business has continued to scale, deliver content, and meet the needs of our customers at a time when they need it most,” said CEO Tennealle O’Shannessy.

Note: results FY21 to be announced Tuesday 23rd 10:30am