In the latest Q3 trading update from THG, revenue exhibited a mixed picture, with ongoing challenges but a promising return to growth on a constant currency (CCY) basis, marked by a marginal 0.3% reported dip and a robust 3.2% CCY upswing in September.
For the entire quarter, the group’s overall revenue faced a 4.4% decline, with a 2.1% drop on a CCY basis. The initial reaction was a dip in THG’s shares, but they subsequently rebounded, surging by a notable 6%.
The cumulative revenue for the quarter reached £466.5 million, bringing year-to-date revenues to £1.417 billion, reflecting a 5.5% decrease.
Delving deeper, THG Beauty reported a 4.4% revenue decrease to £272 million, with a 2% fall on a CCY basis. Simultaneously, the critical THG Ingenuity e-commerce services division encountered challenges, with a revenue decline of 8.8% in the quarter (down 8.4% CCY) to £155.7 million.
Despite these apparent headwinds, there’s reason for optimism, as these figures represent an improvement compared to prior quarters. Year-to-date, THG Beauty was down 8.5%, and Ingenuity faced a 13% decrease.
THG emphasized that Q3 marked its strongest quarterly revenue performance in the past year, with performance gaining momentum each month within the quarter. Notably, the company returned to CCY growth in September, although the full-year revenue guidance remains unaltered, ranging from a flat performance to a 5% decrease.
The company underscored its commitment to advancing each division’s strategies to achieve sales growth and margin restoration.
With global de-stocking’s impact on its beauty manufacturing business waning, THG Beauty demonstrated growth in September, with a 1.7% overall increase and a robust 5.1% CCY rise. The strategic focus on higher-margin sales and prudent reduction of less profitable orders significantly enhanced Q3 margin performance.
For Ingenuity, although «enterprise sales cycles have been longer than anticipated,» the division’s performance improved in September, with a modest 2.3% decline compared to a 14.9% year-to-date decrease. The division also reported a continued monthly recurring revenue increase, surging by 7.6% in September, building upon June’s 6.2% growth. This growth was fueled by both existing clients and new business.
THG also highlighted an expanding customer base in the UK Beauty division, attributed to investments in customer satisfaction, including extended next-day delivery cut-offs and record-breaking UK delivery times, now 17% faster than in Q3 2021.
CEO Matthew Moulding expressed contentment with Q3’s progress, noting that the company is navigating the challenges of a high-inflation global environment and is on track to restore margins to pre-inflation levels while focusing on robust cash generation. He emphasized the company’s readiness for peak trading, supported by investments in automated fulfillment centers in the UK and the US, which have enhanced customer experiences, boosted contact rates, and elevated overall satisfaction.
