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THG has maintained its full-year revenue and EBITDA guidance after welcoming its best quarterly revenue performance in the last year.
Q3 revenues were still down by 4.4% against the prior year, but its performance improved each month in the quarter. The group also returned to positive constant currency revenue growth of 3.2% in September, driven by a strong performance across its Beauty division.
THG Beauty saw a return to growth in September (+1.7%) after the impact of global destocking in beauty manufacturing eased over the period. According to the group, its strategy of focusing on higher margin sales while reducing orders that do not deliver an immediate return supported a “much-improved” Q3 margin performance.
Meanwhile, THG Nutrition delivered a “record” Q3 adjusted EBITDA, “reaping the rewards” from an investment in pricing strategy made during peak inflation. Revenues were still down by 4.6%, but this reflected the division’s rebrand launch, which temporarily reduced new product launches while the new branding was rolled out.
Finally, THG Ingenuity saw progress in its September sales performance (-2.3%) against H1 (-14.9%). Monthly recurring revenue continued to build in September at 7.6%, up from 6.2% in June, underpinned by growth in existing clients and new business.
Over the period there was also growth in UK active customers in THG Beauty and THG Nutrition, supported by investment in the customer proposition with extended next day delivery cut offs and UK delivery times at their fastest ever level.
Matthew Moulding, CEO of THG, said: “Q3 has been another strong quarter of progress across the Group, with each division delivering improved performances. The pivots made within each division to ensure they thrive in a high inflation global environment are bearing fruit.
“The momentum with which we exited Q3 was especially pleasing, with the group returning to positive constant currency revenue growth of +3.2% in September, driven by a strong performance across our Beauty division.”
He added: “We remain focussed on restoring margins to pre-inflation levels while continuing to focus on cash generation. This is reflected in a best ever Q3 profit performance from our Nutrition division. Our cash discipline has been excellent, reflected in delivering positive free cash flow of £5m, despite making c.£140m of capex investments, over the last twelve-month period. The steps we have taken will further underpin the future cash generation of the group.
“Both our operations and inventory are well positioned ahead of peak trading, with the benefits of our investment in UK and US automated fulfilment centres enhancing the customer proposition through accelerated delivery times, positively influencing customer contact rates and overall satisfaction. The group is exceptionally well invested with a strong balance sheet, with each division well positioned to grow market share in any market conditions.”
