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I purchased progress share Warpaint London (LSE: W7L) final 12 months to inject some pleasure and journey into my portfolio. And I’ve bought it. Sadly, it’s the flawed kind, with the inventory crashing 20% this morning (10 September) after publishing its first-half 2025 outcomes.
The AIM-listed magnificence specialist, proprietor of manufacturers together with W7, Technic and Tremendous Facialist, sells reasonably priced cosmetics by way of the likes of Boots within the UK, in addition to within the Netherlands, the Philippines and the US. The shares have been skyrocketing after I purchased them, however the momentum drained away after full-year 2024 revenues, revealed in February, fell in need of expectations. They nonetheless climbed 13.8% to £102m, but it surely wasn’t sufficient.
Yesterday, I used to be sitting on a lack of about 25%. After at this time’s shocker I’m down 44%. So what do I do now?
Warpaint plc is badly injured
At present’s numbers appeared strong at first look. Group income rose 8% to £49.3m, helped by February’s acquisition of Model Architekts. UK gross sales jumped virtually 16% to £18m, whereas abroad income edged up 3.2% to £31.3m. Gross margins improved 250 foundation factors to 45%. Administration flagged up progress alternatives in Boots and Superdrug shops.
However revenue earlier than tax plunged 41% to £6.4m, largely resulting from overseas alternate losses and acquisition-related prices. Adjusted earnings per share fell 13% to eight.5p. The group did a minimum of increase its interim dividend from 3.5p to 4p. The trailing yield is now 4.73%.
What actually spooked traders was the steerage. The board now forecasts adjusted EBITDA between £23.5m and £25.5m, sharply down from earlier steerage of roughly £29m. Administration blamed weak client sentiment within the UK, uncertainty within the US, and the collapse of a long-standing accomplice, Bodycare, which owes £300,000. With the shares now down 50% over 12 months, I’m questioning whether or not to chop and run.
By no means promote in a panic
Warpaint remains to be increasing, margins are enhancing, and Christmas buying and selling ought to assist. However sentiment has soured.
Below strict Motley Idiot buying and selling guidelines, I can’t purchase or promote a inventory inside two full days of writing about it. That’s offers me time to chill off. Promoting at this time would solely flip at this time’s paper loss into an actual one. There’s an opportunity it may very well be mitigated, if cut price hunters transfer in.
The massive query is whether or not the long-term story nonetheless holds and you already know what, I believe it in all probability does. So I’m going to maintain watching and see if administration may give Warpaint a rosy glow.
AIM-listed restoration play
There might even be a case for traders who don’t but maintain the inventory to think about shopping for at at this time’s a lot decrease entry level, however they should be prepared for extra volatility. I’d advise excessive warning.
There’s a hazard I’m holding for the flawed causes. Mainly, as a result of I refuse to confess I bought it flawed. But when the inflation eases and rates of interest fall, a crushed down client inventory like this one might rally arduous. For now, Warpaint stays in my portfolio whereas I lick my wounds.
