THG Plc agreed a £156 million ($176 million) banking facility with its lenders to provide the troubled online retailer with more liquidity as it battles the ongoing cost-of-living crisis.
(Bloomberg) — THG Plc agreed a £156 million ($176 million) banking facility with its lenders to provide the troubled online retailer with more liquidity as it battles the ongoing cost-of-living crisis.
The new lending was “a strong endorsement” of THG’s long-term business model, the company said in a statement on Tuesday announcing third-quarter results. THG said the fourth quarter has got off to a positive start and the company expects to grow margins in 2023 as commodity prices ease further.
Still, THG reported revenue of £518.6 million for the third quarter, which missed the average estimate of analysts surveyed by Bloomberg of £557 million. The retailer stuck to its previous guidance for the year.
“As cost-of-living pressures rise, customers are continuing to prioritise beauty, health and wellness categories and, through investing in bringing them into and retaining them within the THG ecosystem, we are laying the foundations for our future growth,” Chief Executive Officer Matthew Moulding said in the statement.
THG is sticking to its lowered outlook for the year with adjusted earnings before interest, taxes, depreciation and amortization falling below 2021 levels to £100 million to £130 million and revenue growth of 10% to 15%. As well as weaker consumer sentiment, THG has seen steep hikes in raw material costs, including whey for the retailer’s protein shakes.
The shares have fallen 80% this year, with some investors betting on declines continuing. Qube Research & Technologies, Citadel and GLG Partners are among those to build short positions totaling 4.1% of the shares.
Analysts offered mixed views on Tuesday. Sherri Malek at RBC said in a note that THG requires “strong acceleration” in earnings to meet its full-year guidance, while Jefferies’ James Grzinic and colleagues said “access to another £156m of funding will be welcome as we head into peak trading season and an uncertain 2023.”
SoftBank Group Corp. offloaded its stake in THG last week to Moulding and Qatar Investment Authority, the latest in a series of blows for the retailer. THG has been battling questions from investors over its business model and governance controls, and last month the retailer issued a profit warning because of cost-of-living pressures on customers and increasing raw material costs.
SoftBank’s exit boosted Moulding’s control of THG, where the co-founder and CEO is also the company’s landlord and only relinquished the role of chairman in March. Moulding has hinted he could take the business private again.
Founded in 2004 by Moulding and John Gallemore, THG, formerly known as The Hut Group, started out selling CDs but today operates hundreds of websites offering beauty, skincare and health-food products as well as helping rivals sell online via its Ingenuity business.
Ingenuity has repositioned to focus on larger, higher contract value clients and the business has a strong and growing pipeline, THG said Tuesday.
–With assistance from Lisa Pham.
(Updates with context, details from statement from sixth paragraph.)
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