THG has once again failed to deliver the goods. In an environment where plenty of retailers are saying that trading has either held up well or self-help measures are helping to drive a recovery in earnings, THG bucks the trend by issuing a profit warning.
The once hyped e-commerce player has suffered from a sharp slowdown in sales growth, higher raw material prices, transport disruption and contract timing issues.
Sales growth has gone from 35.1% in 2021 to 4.1% in 2022, with the OnDemand division almost grinding to a halt after being one of the strongest parts of the business a year earlier.
AJ Bell’s Russ Mould said: “One of THG’s key selling points was its ability to take third party brands direct to the consumer online, handling all the design, production, packaging, marketing and delivery. This business unit is now up for review, suggesting that it could get streamlined or even given the chop entirely.
“Just as many bricks and mortar retailers have been forced to review their business and focus on what they do best rather than continuously try to expand, online players are also doing the same.
“We’ve seen a period of rapid sales growth for online entities, but times are changing. At the end of the day, it’s all about profit and cash flow, and if anything is acting as an impediment then it must change or go.
“If the stock market doesn’t buy into THG’s realignment efforts that raises the chances of founder and CEO Matt Moulding finding someone to help him take the business private.”
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