The Hut Group warns on profit margins as shares slide but sales reach over £2bn amid shopper demand for beauty products
- THG saw its share price slide over 7% today, with shares down 75% in a year
- Profit margins for 2021 now expected to come in lower than previously forecast
- Beauty product sales strong – with six sales a second at peak online sales times
The Hut Group‘s 2021 profit margins are set to fall short of analyst forecasts, but the firm believes they are well-placed to recover this year.
The e-commerce group, which is also known as THG, saw its share price fall over 7 per cent to 171.2p this morning, bringing losses to over 75 per cent in the past year.
Profit margins for 2021 are now expected to come in at between 7.4 per cent to 7.9 per cent, against previous estimates of around 7.9 per cent.
In charge: THG is led by Matthew Moudling, pictured centre
The dip in 2021 profit margins has been driven by fluctuating exchange rates, according to the company.
THG has reported full-year sales of more than £2billion, but warned that 2022 is expected to be a more challenging year.
Group sales were up 92.4 per cent on a two-year basis in the fourth quarter to 31 December.
The group saw its fourth quarter sales rise 27 per cent to £711million, when compared against the same period a year ago.
Sales were given a boost by recent acquisitions, while revenue via e-commerce tech arm Ingenuity jumped by 41 per cent.
In the past year, the group’s beauty products were the strongest sellers, and it saw six orders per second at peak times.
Matthew Moulding, chief executive of THG, said: ‘We are delighted to report significant growth across all divisions during the peak trading period and to have delivered record annual sales of £2.2billion.’
He added: ‘The new year has started well, and we remain confident in delivering our strategic growth plans during 2022 and beyond.’
THG thinks its sales over the course of this year will rise between 22 per cent to 25 per cent.
Sales: THG has reported full-year sales of more than £2bn, but warned that 2022 is expected to be a more challenging year
Russ Mould, investment director at AJ Bell, said: ‘The only way THG is going to win back the market’s favour is if it delivers better than expected figures consistently for at least two or three quarters. Unfortunately, its latest update doesn’t pass the test as it flags margins are slightly below expectations.
‘Under normal circumstances, a business delivering the level of growth seen in THG’s latest update would be applauded by the market. Sadly, THG has shot itself in the foot thanks to the way it has behaved as a listed company since joining the stock market. And that means only something spectacular will lift the share price.
‘Failure to deliver the level of detail about the business desired by investors, questionable corporate governance standards, and comments by chief executive Matt Moulding that he wished he’d never floated THG all amount to bad practice as far as investors are concerned, and they’ve voted with their feet which has left the share price languishing well below its IPO price.
‘The fact THG is guiding for revenue growth to slow in 2022 is even more reason for disgruntled investors to keep shaking their heads in disbelief.
‘Online companies that pitch their story as rapid growth need to live up to the hype. So far THG is coming across as an ill-trained runner which has brought sprint tactics to a marathon and found it can’t sustain momentum at top pace.’
The Manchester-based group’s share price has fallen sharply in the past year amid mounting concerns over governance at the business.
In response to these concerns, Mr Mounting pledged to appoint an independent chair at the company, dish up more information about Ingenuity and vowed to end a ‘special share’ takeover defence earlier than scheduled.
Falling: A chart showing what has happened to THG share price over the past year