UK's Revolution Beauty turns to co-founders to lead turnaround, scraps sale process

(Reuters) -Struggling cosmetics group Revolution Beauty is turning to its co-founders as it attempts to revive the business and has ended its sale process, it said on Friday, after years of management missteps and declining sales eroded its value.

Tom Allsworth, who co-founded the group with Adam Minto in 2014, will return as CEO and lead a strategy reset that includes cost cuts, equity injections and new licensing deals. Minto will return in a consultancy role.

Both co-founders left the company, following probes into accounting practices launched in 2022.

"Revolution Beauty is a great brand, but the business has lost its way," chairman Iain McDonald said in a statement.

"We are confident that with a return to the founder-led management team, who originally scaled the brand, there is a clear path back to growth and long-term value creation," he said.

Minto, at the time CEO, and Allsworth left Revolution Beauty amid an independent investigation that revealed concerns over certain historical sales, inventory provisioning and personal loans made by Minto.

The company alleged Minto breached fiduciary and other duties and said at the time it was looking to recover "material sums" in related costs.

In 2024, they reached a settlement under which Minto would pay 2.9 million pounds to resolve accounting issues that led to the delay of the group's 2022 results.

Shares of the company, which have lost nearly 98% of their value from the peak in August 2021, were up 10.4% at 3.86 pence as of 0739 GMT.

The branded cosmetics seller had kicked off a sale process in May and begun a review of its funding structure after slowing demand and deep discounting resulted in annual sales slumping by more than a quarter.

Frasers Group dropped out of its takeover pursuit in June, and sources told Reuters that Revolution Beauty rejected a bid from specialist private equity firm True.

The loss-making company expects net sales for fiscal year 2026's second quarter to fall about 25%. It also reported a 29% decline in first quarter sales.

Its gross margins also took a hit from heavy discounts and higher costs from U.S. tariffs.

Revolution Beauty plans to raise about 15 million pounds ($20.12 million) in fresh equity to repay debt and restructure the business, with backing from top shareholders retailer Debenhams and co-founders Allsworth and Minto.

In addition to the equity boost, it said it is in talks with Debenhams to supply branded cosmetics under an exclusive licensing agreement.

($1 = 0.7457 pounds)

(Reporting by Raechel Thankam Job in Bengaluru; Editing by Rashmi Aich and Joe Bavier)