Little ingenuity needed to spot the weakness of THG

theguardian.com:

For all the excitable claims by Matt Moulding, founder, chairman and chief executive of THG, that the e-commerce retailer was a victim last year of a vicious “short attack” from hedge funds, there was a boring explanation for the big tumble in the share price.

The stock market, in its collective wisdom, was already in the process last autumn of deciding that the e-commerce and new-tech brigade – think Asos, Boohoo, Darktrace and others – might be a tad overvalued. The reappraisal wasn’t confined to the UK; it was happening in the US too.

And THG, or The Hut Group as it was, gave investors extra reasons to be cautious because its communication around its Ingenuity division, the unit that provides “end-to-end technology solutions” for other people’s brands, was cack-handed. Put simply, investors struggled to see what was revolutionary about a marketing, logistics and distribution set-up.

Given that Ingenuity, according to the market’s previous bullish thesis, accounted for about half of THG’s value despite being the divisional tiddler, it was hardly surprising that outsiders had a rethink. You don’t need a conspiracy theory to explain the shares’ descent from 600p from 200p-ish.

They now stand at 168p, down 10% on the day, after a trading update that said operating profit margins in 2021 would be slightly below City forecasts. Conventional factors, including foreign exchange rates and commodity prices, were to blame, but it all adds to the impression that THG inhabits the same universe as the rest of the corporate world and should probably be valued as such.

THG’s Beauty businesses, centred on the Lookfantastic brand and with revenues of £1.1bn in 2021, are clearly a substantial operation. So, too, the shake and protein