Following today’s release of THG’s figures for the three months ending 31st December 2023; Sophie Mitchell, Retail Analyst at GlobalData, a leading data and analytics company, offers her view: “In an effort to put a positive spin on what has been a bleak year for THG, the group chose to focus on the 1.1% revenue growth it achieved in constant currency terms for its Q4 FY2023. However, the reported figures usually referred to are more indicative of the group’s struggles, where it has seen revenue decline in every period of the year, falling 6.1% in its H1, 4.4% in Q3 and now 1.0% in Q4. Additionally, this decline is on top of an already weak comparative where group revenue declined 6.3%. THG is fundamentally being challenged by both its competitors in the beauty and nutrition spheres, and its position as an online pureplay at a time when consumers are favouring instore shopping experiences.
“As is to be expected in the run up to Christmas, THG Beauty performed better than the Nutrition segment, seeing growth of 0.5% compared with a decline of 6.0%, as consumers purchased beauty gifts over personal nutrition products. The group noted that its beauty performance in the UK was particularly strong, delivering 9.0% revenue growth in Q4, highlighting that in the UK THG is managing to compete with the likes of Space NK, Boots and Sephora through its LookFantastic and Cult Beauty retail platforms. This is particularly the case for its competition with Boots, who saw UK retail sales rise 9.8% for its Q3 ending 30 November 2023. Further afield however, THG is being hit by lower international order volumes as the delivery costs for beauty products feel too high for shoppers, especially when consumers can easily purchase the same brands from other retailers.
“THG’s Nutrition arm’s performance was better for the full year, with revenue declining 0.7%, with its H1 performance pulling up two quarters of decline of 4.4% in Q3 and 6.0% in Q4. THG cited issues with exchange rates, particularly with the Yen due to its large presence in the Japanese market, as hindering its Nutrition revenue growth this year. However, the Nutrition market is becoming more saturated, so THG may need to fight harder to retain the supremacy of the MyProtein brands.
“THG Ingenuity’s performance further dragged down the group’s performance, with a revenue decline of 6.1% for Q4 and 13.0% for the full year. This disparity in performance across fascias is leading shareholders to call for THG to demerge the three divisions, which they believe are worth more as separate businesses. THG seems confident that as external factors change in 2024, such as reduced cost-of-living pressures, the easing of commodity inflation and better FX rates with Japan, as well as a THG Ingenuity deal with Holland & Barret, will turn around its fortunes in 2024. However, more will need to be done internationally to increase volumes, such as bringing down delivery costs if THG wants to achieve revenue growth in its Beauty and Nutrition arms as an online pureplay, as its UK performance alone will not be enough to pull it into the green zone.”
