As the curtains fell on yesterday’s dismal trading session, the spotlight remained on THG (LSE: THG), a lackluster performer in the stock market since early 2021. The tale of its decline is grim, with a staggering 93% loss in market value for the UK-based e-commerce giant. The scene was set for another disappointing act as THG unveiled its interim results, sending its shares tumbling by 15% in response to the lackluster performance.
Uninspiring Results
In the realm of THG, three powerful divisions reign supreme:
- THG Nutrition, the protagonist focused on supplement products and guardian of the MyProtein brand.
- THG Beauty, the keeper of several beauty brands, including the coveted LookFantastic.
- THG Ingenuity, the sage that offers end-to-end e-commerce solutions for retailers through cutting-edge technology.
Amidst this intricate web of divisions, a tale of mixed fortunes unfolded in the first half of the year. Beauty, the leading division, witnessed a modest 6.9% revenue increase to reach £531 million. However, this was overshadowed by a 7.5% sales slump in the Nutrition sector, amounting to £299 million. Braving the storm, Ingenuity showcased a noteworthy 14.1% revenue surge to £80.2 million. When the dust settled, group revenue inched up by 2.2% to £911 million, stripping out £23 million from discontinued revenue. Adjusted EBITDA also saw a modest 3.6% rise to £48.8 million, with a 5.2% margin reflecting an improvement from the previous period.
In the crystal ball gazing towards the full year, THG foresees EBITDA gravitating towards the lower end of the current consensus range of £134 million to £156 million. Citing foreign exchange hurdles, the journey seems treacherous, with a trading landscape that leans more towards resilience rather than excitement. Despite the positive surge in the third quarter for the nutrition segment and slow growth in beauty sales, the firm revealed an operating loss of £84.4 million for the period.
Three Becomes Two?
In a dramatic turn of events, THG is set to part ways with its Ingenuity technology platform, a move that could potentially unlock hidden value for shareholders by curbing the drag on group profitability. The promise of buoyant cash flows from the nutrition and beauty segments could pave the way for future dividends, balancing the delicate financial scales. However, the financial duet sings a different tune, with Ingenuity contributing £226 million out of its £306 million revenue from THG itself during H1, leaving a deluge of unanswered questions. With a net debt amounting to £685 million in June, the future remains shrouded in uncertainty, casting shadows over the potential gains from the demerger.
Amidst this swirling storm of numbers and decisions, the ultimate question looms large – should I buy THG shares?
In the realm of financial fortresses, THG finds itself at a precarious crossroads. With a P/S ratio resting at a meager 0.38, the garb of cheapness adorns THG, enticing weary investors into the bargain basement of stock trading. However, the fickle winds of the market make the forecast of future sales a Herculean task, adding a dash of uncertainty and risk to the investment tale. Digging deeper, a lack of robust competitive barriers for its brand portfolio rings alarm bells, as a fortress without a moat leaves the castle vulnerable to external threats.
The protagonist, MyProtein, might hold its own against the titan of Amazon, with its subscription perks and doorstep delivery offerings. However, in the vast kingdom of retail, Amazon’s Prime service casts a long shadow, offering a wide array of perks that leave little room for a seamless transition. Free shipping, flexible subscriptions, and live sports streaming – all checkmarks in Amazon’s grand theatre of service, overshadowing the allure of THG’s offerings.
In the epilogue of this saga, the curtain falls on the THG stock, with the audience left pondering its fate. While the allure of cheap valuations beckons, the undercurrent of risks and uncertainties clouds the horizon. In the vast tapestry of stock trading, there are brighter stars that shine, casting a flicker of hope and promise in a world filled with uncertainties and risks. As the final chapter closes on THG, the story of missed opportunities lingers, a cautionary tale in the ever-shifting landscape of the stock market.
Leave feedback about this