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Oct 26, 2020
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Hut Group powers ahead in Q3, all business units are strong

Oct 26, 2020

The Hut Group has rarely been out of the news in recent months and on Monday it made headlines again as it announced a third-quarter trading update that showed its business continues to go from strength to strength.

The Hut Group

THG, which was recently listed on the London Stock Exchange, said the three months to the end of September saw group sales rising 38.6% to £378.1 million.

The company highlighted the acceleration of growth in Q3 compared to the first half, although that acceleration was understandable given that much of the first half was dominated by UK lockdowns.

But there's no denying that the quarter was an impressive one. The company said its Direct-to-Consumer (D2C) online revenues increased to £320.2 million, up 51.3%, year-on-year, compared to 47.8% growth for H1.

Other important metrics looked good as well with the business saying that new customer acquisition “continues to be very strong, while repeat purchase rates continue to improve from both new and existing customers”.

Within its total sales figure, its largest unit, the important THG Beauty operation, saw sales up by a strong 45% to £157.5 million. This unit includes webstores/subscription stores such as Lookfantastic, Skinstore, Mankind and Glossybox.
It has other, smaller operations such as THG Nutrition and THG Lifestyle, with the latter including the Coggles, AllSole, Mybag, Zavvi, Iwoot and Pop In A Box brands. Here, sales rose 79.6% to £24.4 million. 

But it's the THG Ingenuity operation that’s perhaps the part of the business analysts are watching the most as it sees the company (which now describes itself primarily as a technology business rather than a retail one) using its tech to power the webstores of other, external retailers. 

In Q3, this division saw its sales rising 10.1% to £35.4 million when including broader Ingenuity services such as beauty manufacturing and product development for third parties. But the high-margin Ingenuity Commerce revenues grew to £5.1 million, up a powerful 171.4%. 

The group expanded Ingenuity's functionality and distribution reach during the period with the launch of three new warehouses in the US, UK and Singapore, bringing the total to 17 warehouses and fulfilment sites across four continents. 

It also said that its Ingenuity Commerce pipeline remains “very robust with enquiries for THG's services at an all-time high and numerous partnerships at advanced stages”.

At its recent IPO, the company offered guidance for FY20 revenue of around £1.43 billion, representing a growth rate of over 25%. However, following the Q3 performance “and continued momentum so far in Q4”, this guidance is now being lifted to a range of between £1.48 billion and £1.52 billion, which would mean a rise of between 30% and 33%. 

Despite the disruptions to normal business this year, it also said Q4 remains “a key and important trading period each year”, typically accounting for between 30% and 32% of group revenue, with Black Friday playing a crucial role.

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