Lookfantastic owner THG is reporting record sales for the 2022 financial year – following a strategy of investing in lower prices in order to retain customers through the cost-of-living crisis.
THG says in a trading update today that group revenue rose to £2.25bn in the year to December 31 2022. That’s 3.3% up on the previous year – or 4.1% when sales in Russia, suspended following the invasion df Ukraine, are excluded. Sales were particularly strong in its beauty (+6.1% to £1.2bn) and Ingenuity (+7.1% to £208.1m) businesses.
Compared to pre-pandemic 2019, sales were up by 39.6% across the group.
The business investment in keeping prices low was offset by £100m in cost savings and efficiencies made in 2022 – including moving out of loss-making categories – with a further £30m of savings planned for 2023. In the current year it expects that adjusted EBITDA (earnings before interest, tax and one-off costs) will be in line with market expectations and in the medium term it expects profit margins of at least 9%.
The retailer is now focusing on its core businesses, of THG Beauty, THG Nutrition and THG Ingenuity, where sales grew by 4.8% in total over the year, and on high margin categories. THG On Demand – where sales fell by 16.9% – is under review. THG Ingenuity says its strategy of working with larger and higher margin clients is now paying off, and it expects to add £1bn in gross merchandise volume to its platform during the year.
THG chief executive Matthew Moulding says: “In a year that presented numerous challenges across the world, I’m proud that the THG team has delivered another record revenue performance at £2.25 billion. Amongst many highlights, I’m especially pleased with the progress of Ingenuity, successfully competing with major global technology giants to transform digital operations for global retailers and brands.
“With the completion of the divisional reorganisation, and around £100 million of annual efficiency savings already delivered, the Group enters 2023 with strong momentum to achieve substantial margin expansion. Core commodity prices used within our nutrition division have seen significant deflation since their record highs in 2022, giving us confidence in significant profit progression as we move through the year ahead, against a much reduced group cost base. We remain highly confident of delivering adjusted EBITDA margins in excess of 9.0% over the medium-term.
“Our delivery of c. £50 million free cashflow in H2 2022, coupled with c. £640 million of cash and facilities at year end, mean we are well positioned for further operational and strategic progress, notwithstanding the continued macroeconomic uncertainty.”