THG lowers forecast as rising costs hit shoppers

THG has reduced its sales and profit expectations for the full year as rising interest rates and energy costs put pressure on consumer spending.

The Manchester-based ecommerce group, formerly known as The Hut Group, forecast sales growth of 10-15 per cent and adjusted earnings of between £100mn and £130mn for the year ending December.

It had previously predicted sales growth of 22-25 per cent, excluding a negative effect from ceasing sales in Russia and Ukraine.

Chief executive and co-founder Matt Moulding said that the company had “prioritised our loyal customer base over maximising near term gross margins” as economic clouds gathered.

“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.

Shares in the ecommerce group have fallen almost 80 per cent this year.

For the six months to end 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 £57mn average of analyst forecasts compiled by Bloomberg.

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.