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Shares in THG fell by as much as 20 per cent on Thursday after the ecommerce group lowered its sales forecast for the year, which was held back by high inflation and lacklustre performance in its beauty division.
The company, which owns websites Lookfantastic and Myprotein, said annual revenue from continued operations would be flat or drop up to 5 per cent having said in April that revenue growth would be in the “low to mid single-digit” range.
Pre-tax losses also widened to £133mn in the six months to June 30 compared with £108mn during the same period last year. However, adjusted earnings, its preferred metric, were £50mn, slightly above the upper end of previous guidance. Revenue was down 9.3 per cent to £969mn.
Formerly known as The Hut Group, THG was hailed as a future star of the UK tech industry when it listed with a valuation of £5.4bn in 2020.
However, a string of profit warnings, confusion about its technology platform Ingenuity and concerns over its corporate governance have blighted its life as a public company. The stock has lost 90 per cent of its value since its initial public offering.
Chief executive and co-founder Matthew Moulding said the results were “strong” in a post on LinkedIn.
He said that as a manufacturer of goods for other beauty brands, THG suffered from an industry-wide decision to “delay manufacturing orders as they [brands] looked to reduce excess stock in the global market” but said that the beauty division was ordinarily very profitable. Beauty sales were down 10.4 per cent to £538.7mn.
THG’s nutrition business, selling items such as protein powders, delivered a record first-half revenue performance, but sales at Ingenuity, which powers and runs other retailers’ ecommerce operations, fell 15 per cent.
Moulding added that inflationary pressures were still high but recent trading had been encouraging as THG sought to lower costs and streamline operations.
THG maintained its forecast for full-year adjusted earnings before interest, taxes, depreciation and amortisation of about £120mn and insisted that it would prioritise “profitable sales”.
Wayne Brown, an analyst at Liberum, said this “appears achievable given tailwinds from whey prices, better beauty manufacturing margins, efficiency savings and Ingenuity contract wins”.