THG shares plummet after group lowers annual sales forecast

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Shares in THG fell 20% on Thursday after the e-commerce group cut its sales forecast for this year, citing high inflation and underperformance of its beauty division.

The company, which owns the Lookfantastic and My Protein websites, said annual revenue from continuing operations would be flat or down by up to 5%, having said in April that revenue growth would be in the “low to mid-single digit” range.

Pre-tax losses also widened to £133m in the six months to June 30, compared with £108m in the same period last year. However, its preferred measure of adjusted earnings was £50m, slightly above the high end of previous guidance. Revenue fell 9.3% to £969m.

THG, formerly known as The Hut Group, was hailed as a future star in the UK technology industry when it went public in 2020, with a valuation of £5.4 billion.

However, a string of profit warnings, confusion over its technology platform Ingenuity and concerns over its corporate governance have marred its life as a public company. The stock has lost 90% of its value since its IPO.

CEO and co-founder Matthew Molding posted on LinkedIn that the results were “strong.”

He said that as a manufacturer of merchandise for other beauty brands, THG has suffered from industry-wide decisions to “delay manufacturing orders as they (brands) look to reduce excess inventory in the global market,” but said the beauty sector is typically very busy. profitable. Beauty sales fell 10.4% to £538.7 million.

THG’s nutritional products business, which sells products such as protein powder, achieved record first-half revenue, but sales at Ingenuity, which provides support and operations for other retailers’ e-commerce businesses, fell 15%.

Molding added that inflationary pressures remain high but recent trading has been encouraging as THG seeks to reduce costs and streamline operations.

THG maintained its forecast for full-year adjusted earnings before interest, tax, depreciation and amortization of about 120 million pounds and insisted it would prioritize “profitable sales”.

“This appears achievable given the boost in whey prices, improved beauty manufacturing margins, efficiency savings and the Ingenuity contract win,” said Liberum analyst Wayne Brown.