Lush reveals £4m loss

A slump in shoppers in North America, an abandoned operation in Brazil and the cost of its decision to pay all staff the voluntary Living Wage were all cited as reasons for the decline.

But boss Mark Constantine (pictured) has said in his annual report that Lush needs to become the number one cosmetics company “for the sake of the environment”.

Lush Cosmetics Ltd’s accounts, for the year to June 30 2018, reveal a £3.9m loss, after £22.6m profit the previous year.

It lost £4.9m from its business in Brazil, where it closed its factory and five shops. “Along with punitively high taxes, the prolonged economic recession and political instability, we could not justify continued investment in this market,” Mr Constantine’s report said.

Sales declined in North America, Lush’s largest retail market, amid a slump in footfall. Its joint venture there still yielded a “significant profit”, of which it received £30.9m, but this was a drop of 36 per cent year-on-year.

Lush announced in 2017 that it would pay all its staff the independently-set, voluntary Living Wage – currently £9 an hour outside London and 79p more than the government’s national living wage for over-25s.

“As a business we are committed to a modern form of capitalism, which relies on the people at the bottom of the pyramid being able to afford to have a roof over their heads and food in all circumstances,” Mr Constantine’s report says.

“So what we have done is allowed our lowest wages to be independently calculated by the Living Wage Foundation to ensure that is the case. It has cost us financially, but in turn it shows our staff we care and ensures we can still attract the best talent.”

The report notes that half of Lush’s UK manufacturing staff are not from Britain.

It says the company’s loss has led to several initiatives to improve productivity. “These include focus groups looking at cost of goods (including a full review of retail pricing), staff costs in the larger stores and the progression of system efficiencies, design and property costs, and a full review of our sales and administration cost base,” it adds.

Mr Constantine said Lush is the world’s 33rd biggest cosmetics company, only 4.2 per cent the size of the biggest player, L’Oreal.

“For 23 years, we have made great products, with beautiful ingredients, we are transparent with our customers and we don’t sell fake benefits,” he wrote.

“We are not the number one cosmetics company, but for the sake of the environment, we really need to be. We believe that Lush has the potential to be a ‘keystone species’; a keystone species is defined as a species that has a disproportionate positive benefit on their ecosystem in comparison to their numbers.”

He added: “There is a group of us reaching the pinnacle of our careers and we are in sight of what we wanted to do all our lives. We wanted no preservatives, we wanted no packaging, and bit by bit we have worked towards doing it.”

The report also notes that Lush’s donations to charities and campaigns passed £15m for the first time, taking the total donated to more than £50m.

Lush Cosmetics has 446 shops in its ownership and 928 under its brand, in 49 countries. It manufactures in six countries and has 12,371 staff.