W7 make-up owner’s shares drop as high street retailers slash Christmas orders

Shares in cosmetics company Warpaint plummeted on Monday after the W7 owner warned that retailers are putting in smaller Christmas orders amid the downturn on the UK high street.

The firm, which debuted on London’s junior market in late 2016, said strong growth in international markets would not be enough to offset a softer market in the UK.

Pre-tax profits will now be in the range of £8.5 million to £10 million, compared with a previous estimate of £12 million.

Shares dropped 43% in morning trading.

Warpaint’s brands, which include W7, Technic and Man’stuff, are stocked in high street retailers including B&M, TK Maxx, Boots and Superdrug.

It also produces white label products for the likes of Asda and Matalan.

But the company said British retailers were reducing stock levels and Christmas orders, in yet another sign of nerves on the high street.

Karla Rendle, senior analyst at GlobalData Retail, said: “The cosmetics market in the UK continues to see strong growth forecast, however a highly saturated market means retailers are under greater pressure to respond to ever changing trends.

“Placing smaller orders allows retailers to be more agile in reacting to trend-fuelled demand and prioritising shelf space.

“Social media drives trends for make-up at such a pace that retailers will suffer if they order too much of the wrong brand or product.”

The UK accounted for 44% of group sales in the first half of the year, making it a crucial market for Warpaint.

However, there was better news from abroad as sales in the US were up 60% as at September 30 2018.

EU sales excluding the UK were up 13% in the same period.

Sam Bazini and Eoin Macleod, joint chief executives, said: “Whilst the current UK market conditions are challenging we are seeing strong growth in our overseas sales.

“We remain well positioned to take advantage of any improvement in UK market conditions and will continue our strategy of growing and diversifying our international sales.”