THG [LSE:THG) has reported record revenues this morning, up 35% year on year to £2.2bn. This is for the year to the end of December. Revenue was up 27.1% on a yoy basis over the fourth quarter of last year.
Compare that with the fourth quarter in 2019, and THG’s revenues have soared by 92%. This is impressive work when you consider many analysts and investors have been fairly gloomy about retail’s prospects during the pandemic.
“The operational resilience and performance of our Ingenuity infrastructure was a highlight, dispatching over one million units per day at peak periods,” said Matthew Moulding, the company’s CEO. “The investment we have made in automation in the UK delivered year-on-year efficiencies, and we are on track to launch our first AutoStore facility in the US during Q2 2022, supplementing the six warehouses added to the network across three continents during 2021.”
First year as public company
Last year was THG’s first year as a public company. Despite the challenging conditions, it seems to have scaled its revenue and expanded its business model. Management singled out its THG Ingenuity as a key part of the success story.The company has performed well ahead of expectations since its IPO 16 months ago. Since it listed it has hired a further 3000 personnel, most of whom are located in the UK.
The company did, however, warn that it expected 2022 would be a more challenging year.
Full year adjusted EBITDA margin in the year just ended is likely to be in the range of 7.4% to 7.7%, versus expectations of 7.9%. This is being attributed to adverse foreign currency movements.
THG said Beauty was its strongest performing category, with six orders being received every second during peak trading periods. All divisions within the group experienced growth.
Investors disappointed on THG profit margins
Shares in THG were down in early trading however, on the back of the company’s comments on profit margins, which were admittedly down.
Ingenuity Commerce is the company’s end-to-end technology service, from which THG expects to achieve a considerable slice of its sales. But the company has seen its share price dropping over the year and the profit margins forecast may not do it many favours with investors. Trying to stave off further selling, Moulding has said he will appoint an independent chair.
Moulding has been getting THG exposure for all the wrong reasons, including a pledge of shares as collateral against a loan from Barclays. Investors were worried that the shares – 182m in total including a stake of 9.2m owned by Moulding’s wife – could have been sold to meet a margin call.
THG stock has been sold off throughout 2021
Shares in THG were trading up at almost 760p at the start of last year but have sold off over the autumn and can now be had for 173p. We remain concerned about both the share price performance and the high PE ratio. While revenues are increasing, the profits and EPS numbers do not look attractive on the stock.
THG continues to measure up well against the market, where there are a large number of names in broad retail that are struggling in the wake of the pandemic, or due to a broad shift to online retail.
