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THG has cut its full-year sales and profit expectations as rising interest rates and energy costs put pressure on consumer spending.
The Manchester-based ecommerce company formerly known as The Hut Group forecast sales growth of 10-15 per cent and adjusted earnings of £100mn-£130mn for the year ending December.
The new forecasts are down from previously predicted sales growth of 22-25 per cent, excluding a negative effect from ceasing sales in Russia and Ukraine, and adjusted earnings of about £161mn, similar to last year’s.
Shares in the company were down more than 20 per cent in morning trading to a new low below 40p, taking their decline since the start of the year to 80 per cent after what RBC analyst Sherri Malek described as “another large and disappointing downgrade”.
Chief executive and co-founder Matt Moulding said the company had “prioritised our loyal customer base over maximising near-term gross margins” as economic clouds gathered, and was aiming to raise prices “slower and lower” than headline inflation.
“The strength, resilience and agility of our vertically integrated business model, coupled with automation, has enabled us to significantly invest in price protection for consumers currently facing unprecedented cost-of-living challenges,” he added.
For the six months to the end of June, THG reported record sales of £1.1bn, in line with consensus market forecasts. However, adjusted earnings before interest, tax, depreciation and amortisation of £32.3mn were below the £48mn average of analyst forecasts compiled by Visible Alpha.
The company also reported a higher than usual cash outflow of £271mn as it invested in infrastructure and additional inventory, pushing it into a net debt position of £226mn at the end of the period.
THG has endured a difficult year, having already warned of slowing sales growth and contracting profit margins because of high commodity prices. Those pressures are now easing but the impact will not be felt until the final quarter.
In July an agreement that would have allowed Japanese investment group SoftBank to acquire a fifth of its Ingenuity technology division for $1.6bn was terminated.
The group, worth more than £5bn when it floated two years ago, now has a market capitalisation of just £500mn.
THG also said Dean Moore, the former finance director of Cineworld, and former Microsoft executive Gillian Kent, would join the board as non-executive directors.
Andreas Hansson, the SoftBank representative on THG’s board, and senior non-executive director Zillah Byng-Thorne are both stepping down with immediate effect.
Damian Sanders, a former audit partner at Deloitte and a THG director since 2020, will become the senior non-executive director.
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Image and article originally from www.ft.com. Read the original article here.