The Hut Expects Slower Sales After Profit Misses Estimates

(Bloomberg) -- THG Plc warned that profitability missed analysts’ estimates and said sales growth will decelerate this year amid high prices for protein shake ingredients and continued uncertainty from the pandemic. 

Shares of the beleaguered shopping emporium dropped as much as 11% Tuesday. They have lost more than three-quarters of their value in the past year.

THG, co-founded by Matthew Moulding, has been dogged with controversy amid concerns about corporate governance and growth prospects of its Ingenuity unit, which helps brands sell their goods online, offering services from building websites to fraud detection. The company blames short sellers for the drop in confidence about its business.

THG said its adjusted earnings margin was in the range of 7.4% to 7.7% in 2021, lower that the market’s estimate of 7.9%. Adverse currency shifts stripped 0.9 percentage points off the margin, THG said.

Formerly known as The Hut Group, the company sells beauty, skincare and health-food products, such as protein shakes, across hundreds of websites.  

Sport Shakes

The company, which operates the myprotein.com website that’s used by gym-goers, noted a rapid acceleration in the pricing of whey protein on a call with analysts. “It’s a seriously material cost of goods for the group,” said Commercial Director Steven Whitehead.

THG said the whey price spike would be “transitory.” “It’s a when not if, we see those improvements,” added Whitehead.

Myprotein’s direct-to-consumer model and market position means it’s able to pass on some of the cost to customers, THG said. “Our current average sell price on those products is tracking at plus 30% year-on-year and we’re not actually seen any negative impact to demand,” said Lucy Gorman, CEO of THG Nutrition.

The company also forecast sales growth of 22% to 25% in 2022, compared to a near 38% uplift last year.

While the early part of 2022 is expected to be more challenging, THG said it expects its profit margins to improve throughout the year as investments in automation start to pay off.

Ingenuity now has 187 live customer websites, up from 163 in the third quarter. The company has set a target of 400 live websites by the end of 2022. The company reiterated that Ingenuity will generate revenue of as much as 112 million pounds this year.

The company’s share price has been weighed down by fears about Ingenuity and corporate governance concerns, largely around Moulding’s tight grip on THG as a major shareholder, landlord, chairman and chief executive officer. Investors also question about whether SoftBank Group Corp., a major investor, will exercise an option to buy 20% stake in Ingenuity.

Following a tumultuous year as a public company, Moulding hinted at an event in November that he might consider taking the business private again.

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