THG shares slide as it misses profit margin forecasts

theguardian.com:

Shares in THG have fallen sharply after the online shopping group warned profit margins for 2021 would come in below expectations and the early part of 2022 would be more challenging compared with the same period last year when global lockdowns fuelled sales.

The company, founded and run by Matthew Moulding, announced on Tuesday that margins for 2021 would be 7.4% to 7.7%, against estimates of 7.9%, but should recover this year. Its shares fell 9% after the update, to 169p, well below the float price of 500p in September 2020.

Manchester-based THG (formerly known as The Hut Group), which runs beauty and nutrition websites including Lookfantastic, Cult Beauty and Myprotein, made record annual sales of £2.2bn in its first full year as a public company, up 37.9% on 2020 and helped by acquisitions. Sales grew 27% in the fourth quarter to £711.7m.

Moulding has pinned his hopes on the growth of Ingenuity, a division building direct-to-consumer websites for other companies. It increased sales by 42.7% to £57.4m, making it the fastest-growing division between October and December.

THG warned that the early part of 2022 would be more challenging because of the tough annual comparison and record commodity prices within the nutrition division. It expects revenue growth of 22% to 25% this year, including £108m to £112m sales from Ingenuity.

Russ Mould, an 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