Beauty in the eye of the shareholder

By DITA DE BONI

Online sales portal Beauty Direct said yesterday it would expand its portfolio as promised and create a subsidiary company to handle business operations.

The company will divide itself into Beauty Direct Operations, responsible for running the operational and marketing aspects of the online website, physical catalogue and retail store, and Beauty Direct and Online, a holding company to handle investments.

Beauty Direct has formed an alliance with Michael Howard - a chain of three Auckland salons - to offer 17 salon-only haircare brands. The addition brings the Beauty Direct product portfolio to over 60 cosmetic brands and fulfils an earlier promise from the company to branch into related product categories.

The newly created holding company will have more than $2 million to use for further acquisitions. The structure showed Beauty Direct was "comfortable managing the online portion of the business," said CEO Bronwen Evans.

"Many companies with an e-commerce focus are throwing money at things which aren't always providing real returns. We want our shareholders to be comfortable that we can protect our capital base and use it wisely."

Ms Evans hinted that further acquisitions might include an alliance with a pharmaceutical company or chain of chemists.

She said she hoped a deal would be announced before the end of the year.

Beauty Direct has had a 250 per cent sales increase since its initial public offering in late March, with 300,000 hits on the site per month, half from offshore terminals. Ms Evans would not reveal membership numbers for competitive reasons but said the publicity surrounding the company's float had dramatically increased customer numbers.

But the company's shareprice continues to slide despite a growth in sales and membership.

From a high of 26c per share the day Beauty Direct - New Zealand's first front-door, dotcom company - floated, the shareprice hit a low of 9c late May and has since barely rallied back to 9.5c.

Ms Evans said she could not comment on the shareprice but felt it was linked to an impression that Beauty Direct was a tech stock, and had suffered the negative effects of being "caught in the hype" when the Nasdaq took a tumble.

"It is disappointing when there was such a demand for the stock before we floated, and a shame we are perceived as a tech company. But we have a store, physical catalogues and we really are a direct marketing company."

She said it was natural for shares to be "up and down".

"I have a 28 per cent share in this company and I have no intention of selling it. We just have to concentrate on running a successful business."

Last month Beauty Direct posted a maiden loss of $508,000 for the period from May 1999 to March 2000.

It is on course to meet its prospectus forecasts, which put sales revenue at $1.1 million and tax-paid profit at a loss of $426,828 up to March 31, 2001.