Lookfantastic owner THG today says the beauty and nutrition brands it sells are still a priority for customers despite the rising cost of living. It now expects growth to accelerate in its fourth quarter, during peak trading.
“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,” says Matthew Moulding, chief executive of THG. “The fourth quarter has started positively, and we are well positioned from a logistics and supply perspective to meet the significant uplift in demand anticipated during the cyber period, whilst continuing to deliver a high-quality customer experience.”
Sales growth at THG brands is supported by its strategy of not raising prices despite the rising cost of raw materials – although it says these costs are now starting to moderate. It now expects to reduce prices in 2023 while growing profit margins. THG also says it is gaining a growing number of new customers through its mobile apps who tend to spend more and more often than those who don’t use its apps.
Moulding says: “Another strong quarter of delivery across our beauty and nutrition divisions has enabled market share growth in our key global territories. We remain committed to our strategy of supporting our customers around the globe through investment in price protection, without compromising on quality or choice. As commodity prices ease further, we remain well positioned to grow margins into 2023, whilst reducing pricing to consumers. This positions the group well in continuing to expand market share.”
The update comes as THG today reports group revenues of £518.6m in its third quarter, to September 30. That’s 2.1% up on the same time last year. Revenues in its beauty division – which includes Lookfantastic – ranked Leading in RXUK Top500 research – Cult Beauty and Glossybox – grew by 4.9% to £259.7m, while its nutrition division revenues – which includes sports nutrition brand Myprotein – rose by 2.9% to £163.8m. In its core territories, where it has local infrastructure, revenues at the two divisions grew by 10.2%.
Its Ingenuity technology business – which provides ecommerce services for third-party brands – saw revenues grow by 1.3% to £51.7m. The business is now being repositioned under a new CEO, Vivek Ganotra, to focus on larger and higher value clients. Meanwhile, sales at its OnDemand business – which sells personalised products via sites incluing Zavvi, IWOOT and Pop in a Box – fell by 18.5% to £24.5m from £30.1m last time.
The group now expects full-year adjusted EBITDA (earnings before interest, tax and one-off costs) to come in at between £100mn and £130mn before the reclassification of its Software-as-a-Service costs.
THG says that stock levels are now getting back to normal after it completed the roll out of its global logistics programme. That in turn means its investment in working capital over the past two years is steadily unwinding. The brand owner has recently signed a three-year £156m banking facility, following soon after increased investment from the Qatar Investment Authority.