THG revenue growth returns in Q4 as beauty is strong

Beauty e-tail giant and e-commerce tech specialist THG had good news on Wednesday with its preliminary FY23 results containing some positive figures.

But the firm’s shares still fell very slightly on Wednesday morning, although this could have been a reaction to the fact that they’ve risen in recent days after the company’s founder made statements that some interpreted as possibly leading to an attempt to take the company private again.

So what were the numbers? Total revenue for the year was £2.045 billion, which was down 8.7% in total and 8.4% at constant currency. The THG Beauty division saw revenue down 4.4% at £1.171 billion. And the external revenue for THG Ingenuity dropped 3.4% to £154.1 million. 

But importantly, the business returned to revenue growth in the final quarter.

The company saw continuing adjusted EBITDA of £120.4 million  with a 6.1% margin, vs January 2024 guidance of above £117 million. The figure was up 48.4% year on year.

CEO and founder Matthew Moulding said: “In 2023, we made material progress against our strategic priorities, delivering significant profit growth following the support for our consumers through the cost-of-living crisis in 2022. This focus led to the group delivering record EBITDA after cash-adjusting items in 2023, higher than at the peak of the pandemic.

“Having completed our recent infrastructure investment programme, the group is now delivering operating leverage. Our fulfilment network is becoming increasingly optimised through a combination of robotics automation, AI and the onboarding of new Ingenuity clients utilising existing capacity.   

“The return to Group revenue growth in Q4 was especially pleasing, and this momentum has continued into 2024.”

And THG said that at the start of Q1, “overall group revenue trends continue to improve, with notable momentum in Beauty following the strategic changes made during 2023. The group’s start to the year provides us with confidence in delivering in accordance with market consensus.”

Looking at the figures in more depth the 8.4% decline in revenue on a constant currency basis was primarily driven by the company’s action to discontinue loss-making categories. Its continuing revenue declined only 2.8% on the same basis.

The UK was its key growth market although international sales remain significant part of its total at 54.2% (albeit down from 57.1% a year earlier). 

It said THG Beauty (“the leading pureplay in online prestige beauty”), which comprises Lookfantastic, Cult Beauty and Dermstore, saw 80% of its revenue coming from online retail, 10% from prestige own brand and 10% from manufacturing. Within the online retail channel, over 50% of revenue was generated in the UK, with 20% in the US.

And THG Ingenuity, the unit that powers the e-commerce ops of other businesses, strengthened as it signed up a selection of new high-quality clients and expanded partnerships. These included Holland & Barrett (UK e-commerce fulfilment and courier management services), Disney (media content for Shop Disney), L’Oréal (US D2C for prestige beauty brands) and Coca-Cola (UK D2C and fulfilment).