17th Jan 2023 14:25
(Alliance News) - Shares in THG PLC tumbled again on Tuesday, after the e-commerce platform cut earnings guidance.
The Manchester-based online beauty products retailer trades as The Hut Group. It said that adjusted earnings before interest, tax, depreciation and amortisation for 2022, on a continuing basis, will be GBP70 million to GBP80 million, in line with current market expectations.
Back in September, THG had guided 2022 adjusted Ebitda of GBP100 million to GBP130 million, so the new range is down by 30% to 38%. Adjusted Ebitda in 2021 was GBP161.3 million, while THG's pretax loss was GBP138.1 million.
The stock was quoted at 56.76 pence on Tuesday afternoon in London, down 17%. The stock is down nearly 70% over the past 12 months and sits far below its debut price in 2020 of 500p.
THG shares fell as far as 31.15p back in October, had rallied in November, fallen towards year-end, and rallied again before Tuesday's new drop.
"THG has missed guidance again for FY22, undermining some of the positive comments and actions it is taking," said investment bank Liberum."So the key risk for investors is the level of confidence they can place on FY23 guidance and the ability of management to deliver on its promises."
The cut to earnings guidance came despite THG reporting record sales of GBP2.25 billion in 2022, up 3.3% from GBP2.18 billion the year prior.
THG Beauty remained the company's largest revenue line at GBP1.19 billion, up 6.1%. THG Nutrition revenue in 2022 was GBP676.4 million, up 2.0%. THG Ingenuity, the retailing platform that THG offers to other retailers, contributed GBP208.1 million in revenue, up 7.1%.
THG said the revenue growth was thanks to significant investment in price strategy to support long-term customer retention, alongside new customer growth in established and emerging markets.
The company also said it had made GBP100 million in cost savings in 2022 and is targeting another GBP30 million worth in 2023.
"With the completion of the divisional reorganisation, and around GBP100 million of annual efficiency savings already delivered, the group enters 2023 with strong momentum to achieve substantial margin expansion," said Chief Executive Matthew Moulding. "Core commodity prices used within our Nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base.
"We remain highly confident of delivering adjusted Ebitda margins in excess of 9.0% over the medium-term."
Zainab Atiyyah, an analyst at research house Third Bridge, said input costs remain a challenge for THG.
"Our experts expect consumers to see 5% to 10% cost inflation in core beauty products over the next year. THG may need to push for more discounting from suppliers," Atiyyah said citing interviews with retail sector executives.
However, the Third Bridge analyst remained positive on THG following the trading update.
"Our experts see THG outperforming its peers in the beauty market and continuing to gain market share from Sephora over the next three years. This progress will be driven by their aggressive pricing and international expansion plans."
By Tom Waite, Alliance News editor
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