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Australia eludes Beauty Direct

By Phil Boeyen, ShareChat Business News Editor

Tuesday 12th December 2000

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Troubled attempts to break into the Australian market have almost halved the forecast sales of online retailer Beauty Direct (NZSE: BDO), which has reported an interim loss of $0.522 million and cancelled an $8.5 million acquisition.

Sales for the six months to the end of September were $226,000 net of any discounts or rebates, which was $194,000 below forecasts.

The company says the drop is mainly due to a lack of Australian export support from suppliers.

"Our main suppliers are struggling with the internet and what it is doing to their agency agreements in each country. We are currently working with them to understand how our export policy can work for those brands. It is difficult to market a site to Australia when only some of the brands will support export sales," the company said in a statement.

Beauty Direct also underestimated the amount of staff costs associated with trying to enter the Australian market, and spent $15,000 on travel and $50,000 on marketing there only to have the initial backing of its suppliers overturned by their Australian counterparts.

In making its six-month report the company also announced that a planned $8.5 million acquisition of CS Company - a cosmetics, toiletry and fragrances business - would not be going ahead.

"Unfortunately it was not possible to fulfil major conditions in the agreement," says the company.

Despite the Australian setback BDO's customer base in New Zealand has grown over 400% in the first six months, and is now growing at around 15% a month. Monthly sales for the first six months averaged $38,000, but jumped to an average of $59,000 for October and November.

The company has expanded the number of brands it carries by 70%, is about to expand into general pharmacy-type products, and has researched carrying other lines such as jewellery, lingerie and home ware.

Costs are also under the spotlight, with the company managing to halve its office expenses by moving away from the Auckland CBD to Newmarket. The directors will not be taking any fees this year and the company's CEO, Bronwen Evans, has reduced her salary.

BDO says taking these reductions in the company's cost structure into account it anticipates an operating deficit for the next six months of $205,000. Total assets to the end of September stood at just over $3 million.

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