THG warns of profit margins and sees stocks selling more

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THG[LSE:THG)aenregistrédesrevenusrecordcematinenhaussede35%surunanà22milliardsdelivressterlingC’estpourl’annéejusqu’àfindécembreLechiffred’affairesaaugmentéde271%surunebaseannuelleparrapportauquatrièmetrimestredel’annéedernière[LSE:THG)hasreportedrecordrevenuesthismorningup35%yearonyearto£22bnThisisfortheyeartotheendofDecemberRevenuewasup271%onayoybasisoverthefourthquarteroflastyear[LSE:THG)aenregistrédesrevenusrecordcematinenhaussede35%surunanà22milliardsdelivressterlingC’estpourl’annéejusqu’àfindécembreLechiffred’affairesaaugmentéde271 %surunebaseannuelleparrapportauquatrièmetrimestredel’annéedernière[LSE:THG)hasreportedrecordrevenuesthismorningup35%yearonyearto£22bnThisisfortheyeartotheendofDecemberRevenuewasup271%onayoybasisoverthefourthquarteroflastyear

Compare that to the fourth quarter of 2019, and THG’s revenue soared 92%. That’s impressive work considering that many analysts and investors have been pretty gloomy about the outlook for retail during the pandemic.

“The operational resiliency and performance of our Ingenuity infrastructure has been a high point, sending over one million units per day at peak times,” said Matthew Casting, CEO of the company. “The investment we’ve made in automation in the UK has delivered year-on-year efficiencies, and we’re on track to launch our first AutoStore installation in the US in during the second quarter of 2022, completing the six warehouses added to the network on three continents in 2021.”

First year as a public company

Last year was THG’s first year as a public company. Despite the difficult conditions, he seems to have increased his income and expanded his business model. Management pointed to its THG ingenuity as a key element of success.

The company has performed well above expectations since its IPO 16 months ago. Since listing, it has hired an additional 3,000 people, most of whom are in the UK.

The company, however, warned that it expects 2022 to be a tougher year.

The adjusted EBITDA margin for the year just ended should be between 7.4% and 7.7%, against 7.9% expected. This is attributed to unfavorable foreign currency movements.

THG said beauty was its best-performing category, with six orders received every second during peak periods. All of the group’s divisions experienced growth.

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Investors disappointed with THG’s profit margins

Shares of THG fell in early trading, however, on the company’s comments about profit margins, which were admittedly down.

Ingenuity Commerce is the company’s end-to-end technology department, from which THG hopes to make a sizable portion of its sales. But the company has seen its stock price tumble over the year, and profit margin forecasts may not do it much favor with investors. Trying to avoid further sales, Molding said he would appoint an independent chairman.

The cast was exposed to THG for all the wrong reasons, including a pledge of shares as collateral for a loan from Barclays. Investors feared the shares – 182 million in total, including a 9.2 million stake held by Molding’s wife – may have been sold to meet a margin call.

THG shares have been sold throughout 2021

THG shares traded at nearly 760p at the start of last year but sold off in the fall and can now be bought for 173p. We remain concerned about both the share price performance and the high PE ratio. While revenues are rising, earnings and EPS figures do not look attractive for the stock.

THG continues to measure up well in the market, where many of the broader retail names are struggling as a result of the pandemic or due to a broad shift to online retail.

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