British ecommerce company THG shares drop 20% on bleak outlook

THG’s shares tumbled 20% on Thursday after the British e-commerce firm downgraded its annual revenue expectations after a challenging first half at its beauty business and online platform for third-party brands.

THG, which owns online brands such as Lookfantastic and Myprotein, expects its annual revenue from continuing operations to come in flat or drop by up to 5% from an April forecast of low-to-mid single-digit growth.

"Inflationary pressures provided significant challenges to consumers and businesses alike over the past 18 months," founder and CEO Matthew Moulding said in a statement.

"Our strategy of supporting our consumers through 2022, sacrificing margins in the short-term, is bearing fruit."

Sales trends were "gradually improving" into the second half, it said, as it kept its annual profit outlook unchanged.

The retail industry has been battling high inflation that has led customers to curb nonessential purchases and businesses to find ways to cut costs and bolster margins. British retailer John Lewis Partnerships warned on Thursday that high costs would delay its turnaround plan by two years.

"The industry wide de-stocking has been material within THG Beauty manufacturing, impacting both revenue and profitability given its fixed cost base," JP Morgan wrote in a note.

After a bumper $7bn London initial public offering in 2020, THG has had several setbacks including profit warnings that have weighed heavily on its shares and led to several takeover approaches, all of which have been rejected.

THG sold some noncore assets and loss-making brands in the past year following a strategic review.

The company reported adjusted core earnings of £47.1m for the six-month period ended June 30, broadly in line with its forecast range.

Shares were down 20% on Thursday. They have lost about 90% of their value from their all-time high hit in 2021.

Reuters