MIDAS TIPS UPDATE: The future looks bright for budget makeup brand Warpaint

British women spend almost £2 billion a year on makeup, Americans spend ten times that amount and beauty products are increasingly popular among metrosexual men too.

The market is large, growing and best known for expensive brands. War paint It’s very different.

Founded by a couple of entrepreneurs from west London in 1992, the group produces affordable cosmetics, typically sold at around a fifth of the price of their luxury equivalents.

Initially, founders Sam Bazini and Eoin Macleod focused on selling their products to discount retailers, a strategy that persisted for many years.

In 2020, however, the duo upped their game, adding brick-and-mortar retailers to their roster, both here and abroad. Today, their clients include Tesco, Boots and Superdrug, as well as Walmart and CVS in the US and several European chains.

As Warpaint moves into new stores, sales and profits are rising. Last week, the group announced a 25 per cent rise in first-half revenues to £46m, with profits up 75 per cent to £11m.

Full-year figures should also be impressive, with brokers forecasting sales of £105m, profits of £24.5m and a 31 per cent rise in the dividend to 11.8p.

Best-selling products include Hot Shot Lip Plumpers, Strawberry-Flavored Lip Masks and Golden Glow Bronzing Drops, all at prices designed to tempt the more cost-conscious shopper.

Lower prices are not a sign of poor quality, however. On the contrary, Bazini and Macleod take a frugal approach to spending, spending far less on marketing and promotion than more upmarket brands.

They also prefer to expand at a steady pace, entering a few stores at a time as they gain new customers so they can evaluate what works best and ensure orders are fulfilled on time.

In 2020, for example, Warpaint items could be found in just 50 Tesco stores. Today, they are on sale in 1,400, with Boots and Superdrug following a similar trajectory.

This offers great potential for growth. In the UK, for example, the company has 20 key customers with 13,000 stores.

So far there are just over 6000 war paint products, but there are plans for many more.

The US and the EU offer even greater opportunities, provided expansion is measured and controlled.

MIDAS VERDICT: Midas recommended Warpaint in 2017 when the shares were worth £2.22. Since then, profits have more than tripled and the shares have risen to £5.57.

Some investors may be tempted to hoard some profits, but it’s worth noting that Bazini and Macleod still own more than 40 percent of the company and remain deeply committed to its continued success, making these shares a solid investment.