THG has launched a review of “lossmaking categories and territories within the THG OnDemand division” as it adjusted 2022 profit forecasts down to £70-80m from an earlier £100-130m.
THG recorded record sales of £2.25bn for the year, but cited rising raw materials cost as well as the timing of contracts within its lucrative Ingenuity division, which markets its sales and fulfilment services to third parties, as factors in a statement to the LSE. Online retailers have also been affected across the board by December disruption to deliveries caused by ongoing industrial disputes.
The company has also announced it will review “lossmaking categories and territories within the THG OnDemand division,” including websites such as Zavvi and Pop in a Box, to focus on its core beauty and nutrition ecommerce businesses as well as Ingenuity.
THG has already undergone a major internal reorganisation over the last year, resulting in the loss of around 2,000 jobs over the course of the year. This along with the new review are expected to result in around £100mn of annual savings, while the company has identified a further £30mn of savings to be implemented in 2023.
The future of its the company’s planned new head office near Manchester Airport also appears to be in doubt after Trafford council reported that a near-£70m loan towards the new HQ “has now matured without any drawdowns for the main facility.”
CEO Matthew Moulding said: “With the completion of the divisional reorganisation, and around £100m of annual efficiency savings already delivered, 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.
“We remain highly confident of delivering adjusted EBITDA margins in excess of 9.0% over the medium-term.”
