Online retailer THG warns over profits as sales slow

Online retailer THG has warned that profits will be lower than expected after a further slowdown in sales growth.

Shares in the business slid on Tuesday morning after it said it is now due to report adjusted earnings of £70 million to £80 million for 2022.

The company, which was previously called The Hut Group, had previously guided investors towards a range of £100 million to £130 million.

THG told shareholders that it saw earnings drop due to softer sales, the impact of loss-making parts of the business, and the timing of new contracts.

It said it has now launched a strategic review into loss-making parts of its OnDemand division, which includes websites such as Zavvi and Pop In A Box, as it seeks to focus further on beauty and nutrition.

The group added that it expects profits to recover over the current financial year due to increased cost-cutting, automation in the US, and “substantially lower” raw material costs.

We announced this morning our Q4 trading update, reporting record sales of £2.25 billion in FY22. Our balance sheet remains strong, with c. £640 million of cash and available facilities at the year end. #weareTHGhttps://t.co/KANYVEXbPP

— THG (@thgplc) January 17, 2023

On Tuesday, THG also revealed that group revenues increased by 3.3% in 2022 against the previous year, dipping below market expectations.

Chief executive Matthew Moulding said: “In a year that presented numerous challenges across the world, I’m proud that the THG team has delivered another record revenue performance at £2.25 billion.

“Amongst many highlights, I’m especially pleased with the progress of Ingenuity, successfully competing with major global technology giants to transform digital operations for global retailers and brands.

“With the completion of the divisional reorganisation, and around £100 million of annual efficiency savings already delivered, the group enters 2023 with strong momentum to achieve substantial margin expansion.”

The company axed around 2,000 jobs as part of efforts to improve cost savings.

Analysts at Liberum said: “THG has missed it guidance again for full-year 2022, undermining some of the positive comments and actions it is taking.

“So the key risk for investors is the level of confidence they can place on full-year 2023 guidance and the ability of management to deliver on its promises.”

THG shares fell 12.3% to 60.03p on Tuesday following the update.