Following today’s release of THG’s figures for the six months ending 30th June 2023; Sophie Mitchell, Retail Analyst at GlobalData, a leading data and analytics company, offers her view: “THG has produced another set of negative results, dragged down by its struggling core beauty proposition, ending its H1 with group revenue falling 9.3%, as it has struggled to find its place in what is, despite the economic environment, a thriving health & beauty market – especially instore. Despite the impacts of inflation on businesses and consumers over the past 18 months, its competitors have continued to witness growth, with John Lewis notably seeing beauty sales rise over 2% for its H1 to the end of July, where THG’s beauty revenue has fallen 10.4%. Key player Boots has also demonstrated the strength of its online channel, with sales through Boots.com increasing by 25.2% for its Q3 ending May 2023, and accounting for 14.0% of retail sales, up 1.0ppts on the prior year.
“THG beauty is seemingly struggling to forge its path in the current economic climate, as it has not captured the value-searching audience in the way Boots has through its Everyday Essentials range and Advantage Card prices. THG has also not managed to capture consumers at the other end of the spectrum, who have flocked to the likes of Sephora, for instance. Active customers in its beauty arm fell by 10%, with THG claiming that this reflects its decision to deploy marketing investment in more profitable territories. This contrasts to Sephora’s outperformance, with owner LVMH reporting that its Selective Retailing division, which includes Sephora and its DFS airport stores, outperformed in its H1 FY2023 with revenue growth of 26.0%. THG must work out how to differentiate its core beauty proposition if it is to return to growth, as Sephora’s performance indicates price is not everything for UK beauty consumers, who will buy into new, exciting brands and products.
“The saving grace in THG’s proposition has been its nutrition arm, which witnessed revenue growth of 2.6%. As a result of this, CEO Matt Moulding has come under pressure from investors to sell its Myprotein brand, as it seen as a promising brand within the group’s offer, that could ultimately end up being owned by a giant such as Nestlé or Coca-Cola. However, Moulding has so far resisted the pressure, arguing that investors in the UK promote selling brands as soon as they show promise. This will likely be a wise move, as the nutrition proposition will help to buoy THG as it is yet to be seen whether its beauty proposition will sink or swim as the year goes on. The group has recently rebranded Myprotein, with the aim of making nutrition in the fitness industry less confusing and intimidating, by building a distinguishable lifestyle brand and making its products easy for consumers to navigate with simplified and educational packaging.”
