THG sales still down but September sees recovery

THG’s Q3 trading update on Tuesday showed revenue still falling, but it returned to revenue growth on a constant currency (CCY) basis in September. It revealed a 0.3% reported fall for the month, but a 3.2% CCY rise.

Overall group revenue fell 4.4% during the quarter and was down 2.1% CCY. The company’s shares fell in early trading but then jumped by a healthy 6% as a result.

Continuing group revenue reached £466.5 million during quarter and in the year to date is running at £1.417 billion, a 5.5% drop.

Within the quarterly figure, the THG Beauty division saw its revenue falling 4.4% to £272 million on a reported basis and dropping 2% CCY. And the important THG Ingenuity e-commerce services division saw revenue down 8.8% during the quarter (down 8.4% CCY) at £155.7 million.

But while those figures don’t look particularly good, they do represent an improvement in the latest quarter as can be seen from the full-year figures so far — with THG Beauty down 8.5% in the year to date and Ingenuity down 13%.

The company said Q3 was the best quarterly revenue performance in the last year, and that performance improved each month during the quarter. As mentioned it returned to CCY growth during September, although full-year revenue guidance remains unchanged at anything from flat to down 5%.

It added that each division “continues to make progress against its stated strategy to return to sales growth and rebuild margins”.

The impact of global de-stocking on its beauty manufacturing business has eased, supporting a return to growth for THG Beauty in September (up 1.7% in total, but up 5.1% CCY). “The strategy of focusing on higher-margin sales while reducing orders that do not deliver an immediate return has supported a much-improved Q3 margin performance,” it explained.

As for Ingenuity, while “enterprise sales cycles have been longer than anticipated in THG Ingenuity, progress is reflected in [the] September sales performance” which was a fall of 2.3%, compared to a drop of 14.9% for the year so far. Monthly recurring revenue also continued to build in September at a rise of 7.6%, an acceleration on June’s 6.2% jump, “underpinned by growth in existing clients, and new business”.

The company also said that growth in UK active customers in THG Beauty was supported by investment in the customer proposition with extended next-day delivery cut-offs and UK delivery times at their fastest ever level (17% quicker than Q3 2021).

CEO Matthew Moulding said of all this: “Q3 has been another strong quarter of progress across the group, with each division delivering improved performances. The pivots made within each division to ensure they thrive in a high inflation global environment are bearing fruit.

“The momentum with which we exited Q3 was especially pleasing, with the group returning to positive constant currency revenue growth in September, driven by a strong performance across our Beauty division.

“We remain focused on restoring margins to pre-inflation levels while continuing to focus on cash generation. Both our operations and inventory are well positioned ahead of peak trading, with the benefits of our investment in UK and US automated fulfilment centres enhancing the customer proposition through accelerated delivery times, positively influencing customer contact rates and overall satisfaction.”