Lush paid managers £5m in bonuses after taking £5m in state support | Retail industry

The cosmetics chain Lush paid its managers £5m in bonuses last year while taking £5.1m in government support and recording a 90% drop in profits.

The bonuses were paid on top of salaries in 2022 to directors including the co-founder, Mark Constantine, and his wife, Mo, who are shareholders, and six staff at Lush Cosmetics, the brand’s main operating company, which runs its manufacturing site in Poole and 886 shops worldwide, including about 100 in the UK.

The company is currently embroiled in a row with its former boss, Andrew Gerrie, over his attempts to sell his shares in Lush, which is known for taking a stand on environmental and social justice.

Gerrie, a former chair of the luxury confectioner Hotel Chocolat, was chief executive at Lush for 20 years before leaving in 2015. He says his stake in Lush is now held via an investment firm that he co-owns, called Silverwood Brands.

Had Lush decided to distribute its profits via a dividend rather than a bonus, it would have had to pay a share of them to Gerrie or Silverwood. Gerrie is not a staff member and so did not receive a share of the 2022 bonus paid by Lush Cosmetics. Gerrie first said he would like to sell his shares several years ago.

Lush has fought Gerrie’s attempts to sell and on Thursday it emerged that the company had launched a new action in the high court in an attempt to prove that the transfer of the shares to Silverwood Brands did not comply with Lush’s company rules.

In 2022, ordinary employees across Lush and its related company Cosmetic Warriors received £1.8m in bonuses. Lush said staff members, not including the directors and management, received an additional £14m in bonuses last year.

Sales at Lush Cosmetics rose 5% to almost £431m in the year to 30 June 2022, not including a North American acquisition, despite the closure of 33 stores. However, like-for-like pre-tax profits slumped to £1.7m, from £29m the previous year. Sales in the UK were more than 10% down on 2019, the last year before the pandemic, but are expected to rise by at least 5% this year.

Most of the government financial support the company received came in the form of business rates relief, which is a reduction in a company’s business rates bill.

The company said it had faced disruption from Covid at its manufacturing operations in the UK and Australia, and some of its retail markets had been hit by the Omicron variant of the virus and by the war in Ukraine.

Lush said Brexit could be the cause of poor sales in EU countries, which were 28% below pre-pandemic levels last year, compared with a 10% deficit in the UK.

“Our popularity in Europe has certainly waned since Brexit, and we need to rebuild the love of our UK-owned brand across Europe,” the annual report said.

It said a factory in Germany in which it had invested after the referendum in 2016 had lost money partly because of lower sales on the continent, where it still faced additional “administrative burdens” as a result of the UK’s exit from the EU.

Lush said its sales may also have been affected by a decision in 2021 to step back from social media. The directors said they remained “proud of and committed to our stance and until we are convinced that proper actions have been taken to protect young people on these platforms we will not be returning to them”.