Shares at THG (THG.L) fell as much as 10% on Tuesday after the British e-commerce company warned its full-year profit margin would miss expectations.
The Manchester-based firm, formerly known as The Hut Group, said its earnings before interest, tax, depreciation and amortisation (EBITDA) margin would come in between 7.4% and 7.7%, below the 7.9% expected. This was due to fluctuating foreign currency movements.
The stock slump means that THG’s share price has fallen more than 75% in the past year since its initial public offering (IPO) in January 2021.
However, the group still posted its highest ever annual sales of £2.2bn ($3bn) thanks to significant growth during the Christmas period and a rising demand for beauty products.
The firm, which is behind brands such as LookFantastic and Myprotein, sells beauty, skincare and health food products across hundreds of international websites.
It said the new year had “started well” but pointed to further challenges ahead as it faces tough comparisons from a year ago when the UK was in lockdown. It is also facing record commodity prices and the knock-on effect on its nutrition division, as well as uncertainty from the pandemic.
Group sales were up 92.4% on a two-year basis in the fourth quarter to 31 December, while fourth quarter sales rose 27% to £711m, when compared against the same period a year ago.
Meanwhile, revenue from THG’s ingenuity unit climbed by 135% to £45.4m.
“We are delighted to report significant growth across all divisions during the peak trading period and to have delivered record annual sales of £2.2bn,” Matthew Moulding, chief executive, said.
“The new year has started well, and we remain confident in delivering our strategic growth plans during 2022 and beyond.”
THG thinks its sales over the course of this year will rise between 22% to 25%, compared to a near 38% rise last year.
Since October last year the company has hired recruitment firm Russell Reynolds to find an independent non-executive chairman in a bid to move the firm to a premium listing on the London Stock Exchange (LSEG.L).
Russ Mould, investment director at AJ Bell, said: “The only way THG is going to win back the market’s favour is if it delivers better than expected figures consistently for at least two or three quarters. Unfortunately, its latest update doesn’t pass the test as it flags margins are slightly below expectations.
“Under normal circumstances, a business delivering the level of growth seen in THG’s latest update would be applauded by the market.
“Sadly, THG has shot itself in the foot thanks to the way it has behaved as a listed company since joining the stock market. And that means only something spectacular will lift the share price.”