Highlights

  • Net sales increased 15.1% to $18.0 million in FY26 from $15.6 million, with growth across domestic, export and global travel retail channels.
  • Export net sales rose 69% to $1.8 million, while Global Travel Retail sales increased 43% to $2.2 million.
  • Operating EBITDA loss widened to $4.5 million from $4.2 million, despite the increase in sales.
  • Lark recognised $36.2 million of non-cash adjustments, including a $20.7 million Goodwill Impairment and $15.5 million whisky inventory write-down.

Lark Distilling Co. Ltd (ASX:LRK) reported higher net sales for FY26 as its newly restaged Signature Whisky Range entered the market and international distribution expanded. Net sales increased 15.1% to $18.0 million from $15.6 million in FY25, with growth recorded across domestic, export and Global Travel Retail channels. However, the higher sales base did not translate into a lower operating loss, with the operating EBITDA loss increasing to $4.5 million from $4.2 million.

The result also included substantial non-cash adjustments. Lark recognised $36.2 million of adjustments, comprising a $20.7 million goodwill impairment and a $15.5 million write-down of acquired whisky inventory to net realisable value.

Sales Growth Across Core Channels

Domestic net sales increased 7.2% to $13.9 million. Within the domestic business, ecommerce sales rose 21.5% to $3.4 million, contributing to the overall increase.

International sales were the fastest-growing channel, increasing 69% to $1.8 million. Lark is now present in 10 Asian markets and completed its first shipment into China during FY26.

Global Travel Retail also recorded a 43% increase in net sales to $2.2 million. The company attributed the growth to additional outlets at Changi Airport in Singapore and a permanent flagship fixture at Sydney Airport.

The final quarter contributed $5 million of net sales, providing a significant portion of the annual result.

Gross Margin and Operating Earnings

Normalised Gross Profit increased $0.8 million to $10.9 million. However, gross margin declined 4.3 percentage points to 60.5%. The company attributed the lower margin to changes in channel mix, particularly increased exposure to International and Global Travel Retail, as well as portfolio changes.

Operating EBITDA remained negative. The loss increased from $4.2 million in FY25 to $4.5 million in FY26. Lark continued to invest in sales, Marketing and international expansion during the year, meaning Revenue growth was accompanied by continued operating expenditure.

Marketing Investment nevertheless fell as a proportion of sales, declining to 27% from 34% in FY25. The prior year had included elevated expenditure associated with the Lark Brand restage.

Significant Non-Cash Adjustments

The statutory EBITDA loss was $19.0 million, including the $15.5 million non-cash write-down of acquired whisky inventories. Lark also recorded the $20.7 million goodwill impairment below EBITDA.

The inventory write-down relates substantially to the acquired Shene whisky bank, which was obtained as part of the 2021 Pontville distillery acquisition. The company stated that the acquired whisky carried a higher cost than whisky produced by Lark.

These adjustments did not reduce the company's reported cash balance, but they materially affected the accounting result for FY26.

Balance Sheet and Cash Flow

Lark ended FY26 with $14.3 million in cash and no debt. Total inventory stood at $49.4 million, including approximately 2.4 million litres of maturing whisky in the company's Whisky Bank.

Net operating cash outflow was $5.8 million, compared with a lower outflow in FY25. Lark said the FY26 figure was affected by a temporary $3.8 million working-capital movement that had largely reversed after the financial year-end.

The completed Pontville Distillery redevelopment is also significant to the company's current operating structure, with distilling, maturation, blending, cooperage and bottling consolidated at one site.

FY27 Priorities

Lark enters FY27 focused on increasing distribution and sales rates across existing and new markets. In Australia, the company expects the Signature Range to gain wider distribution through Spirits Platform while ecommerce and hospitality channels remain part of its domestic strategy.

Global Travel Retail remains a key expansion channel, following its 43% sales growth in FY26. Internationally, China is a primary focus, with additional interest emerging in Europe.

The company also plans to launch its LARK Club loyalty program in FY27, offering exclusive releases, events and other benefits to consumers and shareholders.

Conclusion

Lark's FY26 results show a 15.1% increase in net sales and rapid expansion in export and Global Travel Retail channels, but the company remains loss-making at the operating EBITDA level and recorded a lower gross margin. The $36.2 million of non-cash adjustments, including the goodwill impairment and whisky inventory write-down, also materially affected the reported financial outcome. With $14.3 million of cash, no Debt and a 2.4-million-litre maturing whisky bank, Lark enters FY27 with its focus on distribution expansion, international markets and improving sales performance, while the key financial measure to monitor remains progress toward profitability.