THG ongoing businesses see Q4 progress, new link-up with Holland & Barrett unveiled

By

Sandra Halliday

Published
Jan 16, 2024

Beauty e-tail giant and e-commerce provider THG said on Tuesday that its fourth quarter – the period up to the end of December – was in line with expectations and guidance, as was its full year.

The group returned to revenue growth when looking only at its continuing businesses in Q4. THG had sold its OnDemand division earlier in the year and also completed its strategic review of non-core categories in the second half, which meant it discontinued some small legacy brands within its beauty and nutrition operations.

So, those ongoing businesses saw an, albeit modest, 1.1% uplift. And it has a strong balance sheet and liquidity with around £600 million of cash and available facilities. 

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It also announced a new partnership for its Ingenuity operation on Tuesday with retailer Holland & Barrett.

Looking more closely at the continuing business within the main THG operation, it said group revenue was £597.9 million, although full-year continuing revenue was down 2.9% at £1.98 billion.

The all-important Beauty operation saw revenue up 2.6% on a continuing basis in Q4 at £387.1 million, but it fell 4.3% to £1.17 billion for the year. 

And the Ingenuity business, which provides end-to-end e-commerce services for external clients as well as the firm’s own internal brands, saw external revenue rising 8.1% on a continuing basis at £44.3 million, while falling 3.3% for the year at £153.7 million.

The company said that Q4 saw it turning in its best quarterly revenue performance of the year and it was particularly pleased with its Beauty operation, supported by accelerating growth in App penetration. This also drove valuable first-party customer data, reducing its reliance on paid marketing channels. 

It said that it delivered an excellent operational performance with more orders processed through automated facilities, delivering significant cost savings per unit. Maintaining next-day delivery was a key factor in new customer acquisition and improving customer satisfaction. 

The business had begun to see more positive trends in Q3 and this clearly continued in the final quarter of the year with the company saying that some of the best performance has came from its own brand including Perricone MD and ESPA, as well as its retail platform Cult Beauty. This should continue into the current year, helped by the December 2023 acquisition of American beauty brand Biossance for $20 million.

The UK accounts for more than half of total Beauty revenue and performance here was “especially strong” with 9% revenue growth in Q4. This was helped, as mentioned, by continued improvements in delivery times and higher sales through the App (at 14.7% this time against 10.8% a year earlier). New users were also key and this helped the company outperform the total prestige beauty market in the UK during the period.

The firm also said that the challenges it had seen in the first half from industrywide de-stocking faded during the second half. 

As for Ingenuity, Q4 was the first quarter to see the benefits of the decision THG had taken in 2022 to "pivot to more complex, higher-margin enterprise clients", with external clients delivering double-digit revenue growth during November and December.

It made some major signings last year, including L'Oréal, while also broadening its partnership with Asda.

Which brings us to the new partnership mentioned above with Holland & Barrett. It will be providing D2C operational services for the company and said that overall, its partnerships will add £175 million of incremental GMV to the Ingenuity operations and technology platform during 2024.

The company appears to be confident for the year ahead and it expects to see growth in the period, but will provide more details on this alongside its preliminary results in April.

CEO Matthew Moulding said: “2023 was a year that threw up many challenges for all businesses, and I'm delighted in how the group not only responded to these challenges, but grew stronger through the year.

“A combination of automation and significant cost initiatives delivered in 2022, in addition to a receding inflationary environment, each played a key role in the group delivering an expected record EBITDA performance after cash-adjusting items during 2023.

“The return to revenue growth for both our Beauty & external Ingenuity clients were clear Q4 highlights, especially given the number of changes made to their business models over the past 18 months. But arguably the most pleasing performance came from our recently automated global fulfilment network. Q4 order volumes were delivered in record times, with average global delivery times reduced by one day. These widespread service improvements were achieved alongside a meaningful reduction in the cost of fulfilment.”