The struggling online shopping group THG has said its profits will disappoint for the third time in a year, blaming delivery disruption, contract delays and falling sales at one of its key divisions.
The company, formerly known as The Hut Group, said the profit downgrade was because of lengthier “onboarding” of new contracts at Ingenuity, its unit that helps retailers sell their products online, plus demand for THG’s own online beauty ranges being hit by courier disruption over Christmas.
THG also reported lower than expected sales at its OnDemand division, which allows brands to help customers personalise items with their names, after the firm discontinued some loss-making activities.
Shares in the company fell about 15% to 58p by noon on Tuesday. The company listed on the stock exchange in 2020 at 500p a share.
THG has been struggling since going public, with a string of rows about the firm’s corporate governance and missed financial targets.
In January last year, THG warned that profit margins would be below expectations. At the time the company said margins should recover in 2022 and into 2023 as commodity prices eased and as its technology division Ingenuity, which has much higher margins than the firm’s two main e-commerce businesses, would account for a greater share of group revenue.
Profits fell short of expectations again in September 2022.
In a statement to investors on Tuesday, THG’s chief executive, Matthew Moulding, said: “The group enters 2023 with strong momentum to achieve substantial margin expansion. Core commodity prices used within our nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base.”
Last month, THG faced further pain after it became one of a number of retailers to have insurance cover reduced to its suppliers. Credit insurance is used to protect suppliers against the risk of a retailer going bust between the point of accepting an order and payment being made.
Adjusted earnings for 2022 are now expected to be in the range of £70m to £80m, Manchester-based THG said in a statement. It previously forecast earnings of as much as £130m, according to the financial information service Bloomberg.
