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Hut Group’s quest for higher margins boosts turnover

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Online retailer The Hut Group today said its strategy of moving towards higher margin sales was on track, with group revenues from continuing businesses rising by 71% in the first three months of its financial year.

In 2009 all of The Hut Group’s income came from entertainment sales but in recent years the company has moved away from lower margin sales in order to focus on higher margin categories, such as health and beauty. To this end it has stopped running the white label operations that made up 40% of its income in 2009, and earlier this year stopped selling music and books.

Today entertainment revenues make up 35% of its income, while other businesses have shown fast sales growth. Sports and bodybuilding supplements business, acquired in May 2011, delivered sales up by 87% in the first quarter of this year. Revenues at HQ Hair and Mankind grew by 30%, and at Zavvi revenues from entertainment were up by 33%.

The Hut Group said today that sales had trebled over the past two years as a result of the strategy while at the same time the group had invested in warehouse operations, increased from 110,000 sq ft to 315,000 sq ft. In the third quarter of this year it will launch

Chairman Angus Monro said: “The business consistently delivers market leading revenue and earnings growth period after period.” He said the group’s business model was well positioned as it continued to reduce the mix of entertainment by growing higher margin category sales, “particularly against the backdrop of a challenging high street environment and the continuing sales channel shift online.”

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