Lusomé – 2024 Inflection Point: Investment Update

Amid market volatility and evolving consumer dynamics, we are pleased to provide an update on a success story within our group of companies. Lusomé, a company 4Front Advisory has been closely engaged with, is a prime example of a long-term vision materializing into success. Though some may view their progress as “overnight,” it is, in fact, the culmination of 13 years of steady development.

Our initial analysis of Lusomé (previously SOMÉ here), published just over a year ago, highlighted key growth catalysts. Fast forward to today, and the transformation has been exceptional, positioning Lusomé for an inflection point in 2024, marked by robust growth and value creation.

Strategic Milestones and Growth Drivers

Lusomé is entering a new phase of its journey, driven by a series of transformative partnerships and initiatives:

Kingsdown Partnership: Lusomé has entered into a strategic partnership with global mattress brand Kingsdown, providing access to Kingsdown's extensive dealer network, a significant channel for growth.

Joint Patent Secured: The company has secured co-ownership of a patent for its innovative cooling sheet fabric, positioning itself as a leader in this niche market and offering significant intellectual property protection.

New Gift Channel Expansion: Lusomé has launched a new distribution channel for the gift market, leading to the acquisition of 22 new retail accounts following its first trade show.

Capital Infusion: A recent $1.5 million injection of non-dilutive federal funding provides Lusomé with a strong financial foundation for future expansion and reinforces investor confidence.

Operational Enhancements and Cost Efficiencies

Lusomé has also undertaken several key operational improvements aimed at reducing costs while enabling scalability:

Fulfillment Cost Reduction: By bringing Canadian warehousing and third-party logistics (3PL) operations in-house and switching 3PL providers in the U.S., the company has reduced fulfillment costs by 54%, bringing these costs down to 15% of revenue, compared to 29% in the previous year.

AI-Driven Inventory Management: The implementation of an AI-based inventory forecasting tool has improved cash flow management and inventory planning.

Stable Gross Margins: Lusomé has maintained impressive gross margins of 73% year-to-date, further strengthening its financial position.

Strong Financial Trajectory and Profitability Outlook

Year-to-date (YTD) revenue has increased by 43%, with projections conservatively suggesting a 58% growth for the year, driven by strong B2B commitments and modest direct-to-consumer (DTC) growth. As the company is investing in people and marketing for the aggressive growth aspirations it is not yet profitable but will show a profit starting November 2024. The most recent quarter has set the stage for what we believe will be the most promising growth trajectory in the company’s 13-year history.

Q2 2024 was particularly noteworthy, with Lusomé reporting a 32% year-over-year revenue increase and maintaining gross margins above 70%. This period marked not only significant financial growth but also the solidification of key strategic partnerships.

Key Partnerships and Market Expansion

Among the standout initiatives is Lusomé’s partnership with premium mattress dealers. A pilot program launched with HOM Furniture and Aireloom Mattress in Fall 2023 effectively reversing a negative year-to-date sales trend, delivering a +19% sales lift, a major win in a challenging mattress market. This program led to the largest sheet purchase order for Lusomé in 2023 and set the stage for the Kingsdown partnership.

The company has also expanded its U.S. presence through new sales agency partnerships with Road Runners and Edenborough Sales Agency. Additionally, Lusomé’s successful launch on TSC (Today’s Canadian Shopping Channel) in August has led to further airings planned for November.

Intellectual Property and Clinical Validation

Lusomé’s recent patent acquisition for its cooling fabric underscores its competitive edge and provides long-term value protection. Furthermore, the company is advancing scientific validation through a Harvard Clinical Trial, with results expected in November 2024. This trial is set to further enhance Lusomé’s credibility in the health and wellness market.

Building a Community-Centric Brand

In addition to its operational success, Lusomé has made strides in brand-building with the launch of the "Sweaty Pillow Podcast" and "Sweaty Pillow Community." These initiatives aim to connect with women experiencing menopausal symptoms, providing evidence-based content and support. Since its launch in Q2, the community has gained significant traction, with the podcast reaching 50,000 views across multiple platforms.

Lusomé has also captured media attention, being featured in Oprah Daily, best Menopause products.

Conclusion

Lusomé is well-positioned for a breakout year in 2024, with key partnerships, a diversified sales strategy, and enhanced profitability on the horizon. As the company approaches profitability and continues to execute on its growth initiatives, we believe it is entering the most promising phase in its 13-year history.

For further information on Lusomé or investment opportunities, please contact us at 4Front Advisory.