City Snapshot: THG denies supplier inventory restrictions as stock price plunges | News


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THG this morning denied media reports that major beauty suppliers are restricting inventory due to concerns over discounts, as market worries hit its share price again.

The Telegraph reported over the weekend that THG beauty suppliers, including Unilever’s Dermalogica, were restricting the flow of stock to Matthew Molding’s online retail empire over fears it could do discounts that are too aggressive to achieve sales targets.

THG denied reports to the stock market this morning, saying it ‘knows no notifiable reason for the movement in the share price’ after its shares fell another 8.8% to 103.4p

He stated that Dermalogica has not imposed and does not seek to impose any restrictions on its business relationship with THG Beauty, including with respect to the supply of inventory.

THG added that the commercial relationship between Dermalogica and THG Beauty has lasted for more than 10 years and “although it remains very positive”, the overall revenue generated is minimal for the group, at 0.1% of sales for the year. 2021.

The struggling online empire added that it was not aware of any other key THG Beauty suppliers that have or intend to cut supply or take similar action.

He said: “THG entered the beauty market at the end of 2010 and, as THG Beauty, has since grown into a business generating prestige beauty sales of £1.1 billion over the course of its 2021 fiscal year. THG remains focused on building long-term relationships with its suppliers.

“THG Beauty is the preeminent digital brand owner, retailer and manufacturer in the prestige beauty market, providing a global route to market for over 1,000 third-party beauty brands. This makes THG a key partner for brands looking to drive digital sales growth.

Shares rebounded 3.9% on the news to 107.4p.

morning update

FTSE 100 beverage group and Eastern European coke bottler Coca-Cola HBC experienced a strong business recovery in 2021, with all metrics back above pre-pandemic levels.

The group, which supplies Coca-Cola products to countries such as Russia, Ukraine and Nigeria, saw its currency-neutral revenue per case increase by 5.8%, or 3.9% excluding the price taken for pass on the Polish tax on sugar.

It said pricing measures to mitigate inflation had been taken in 95% of its markets, while market share increased and volumes were not negatively affected, outside of Poland. Pricing has been taken throughout the year with action every quarter, including an additional wave in the fourth quarter in response to increased pressure from COGS.

Currency-neutral 2021 revenue increased by 20.6% on a like-for-like basis. Reported net revenue increased by 16.9%, negatively impacted by the weaker Russian Ruble and Nigerian Naira.

Category mix also improved, as it led to higher penetration of sparkling and energy, while package mix improved thanks to a higher incidence of single servings in the home channel , as well as the reopening of the out-of-home channel.

Comparable gross margin increased by 11.7% while gross profit margins decreased by 170 basis points to 36.2%. Gross earnings were impacted by headwinds from input cost inflation in key commodities sugar, aluminum and PET resin in the second half in particular. Currency-neutral raw material cost per case increased 8%, while comparable costs per case increased 6.3% during the year.

Comparable operating expenses only increased by 7.5% or €125.4 million as it maintained tight cost discipline throughout the year.

Comparable EBIT increased by 23.6% to €831 million, bringing comparable EBIT margins to 11.6%, by 60 basis points year-on-year, including a 30 basis point benefit related to on the sale of a property in Cyprus in December.

In 2022, he expects volume growth to continue in 2022, driven by continued good momentum in the emerging segment. Pricing and other revenue growth management measures will drive another year of currency neutral fund revenue expansion.

Overall, in 2022, he expects to see currency-neutral revenue growth excluding Egypt above the average target range of 5-6%.

However, it continues to expect raw material cost inflation in 2022 and guided to the upper end of its previous single-digit increase in COGS/case, with stronger headwinds in the first half than the second. .

CEO Zoran Bogdanovic commented: “The business experienced a very strong recovery in 2021, with all key metrics above pre-pandemic levels, the result of a consistent and disciplined focus on our strategic priorities over the of recent years.

“We ended the year with strong revenue growth, our highest EBIT margin and free cash flow ever, while continuing to gain market share. This performance demonstrates the strength of our portfolio of 24/7 brands, our revenue growth management capabilities and our execution excellence in our markets.

“We are encouraged by the momentum we see in the business. We expect 2022 to be a year of strong sales supported by continued volume momentum, pricing actions and beneficial category mix. While aware of inflationary headwinds and other risks, our track record and continued focus on efficiency gives me confidence to deliver another year of EBIT growth.

Elsewhere, McBride posted a first-half loss amid falling sales and “the most extreme inflationary cost environment ever in the industry.”

Half-year revenue of £323.4 million in the six months to December 31 was 6.6% lower at constant exchange rates, compared to the same period last year, which had benefited from particularly strong initial demand linked to Covid-19 in key categories.

The influence of skewed demand due to changing consumer behavior resulting from Covid-19 over the past two years makes year-to-year comparisons difficult, McBride said.

Compared to the second half of 2021, revenue increased by 2.6% at constant currency, but volumes for the period were 3% lower than the first half of 2020, the last six-month period reported before the pandemic strikes. This decline is entirely due to the laundry categories which, according to external data, have seen a decline in total market demand since 2019, with the group’s cleaners and tableware volumes at or above the 2019 level.

Adjusted operating profit for the first half decreased by £33.8 million to a loss of £14.8 million, mainly due to exceptional increases in the costs of raw materials, packaging and logistics.

McBride said it has actively engaged with all of its customers to secure “substantial” price increases to mitigate the impact of these exceptional cost increases affecting the entire industry.

The initial increases at the end of the summer have now been overtaken by further increases in input costs and as a result further pricing action has taken place.

“It’s nice to see customer support for these price increase requests with the effect that these further increases begin to benefit exchanges in December 2021 and be more comprehensive from January 2022,” he said. he declares.

He said trading at the start of 2022 was slightly ahead of most recent internal expectations and our current outlook for the second half should show an overall improvement from the first half.

For the last quarter of its fiscal year ending June 30, 2022, it expects pricing actions to approach maturity and business to return close to breakeven at an EBITA level before moving to modest profits in the new fiscal year.

Pricing actions are still ongoing at this time in all countries, with the primary focus being the resumption of material input cost increases in the last quarter. “As with all pricing actions, we remain cautious on volume risk as our customers manage the price positioning of their products during this period of unusually high inflation,” the company said.

It forecasts input costs to remain broadly in line with our December 2021 estimate through the start of the summer, although the outcome of current geopolitical tensions and ongoing supply and demand mismatches may lead to price volatility. many key commodities.

CEO Chris Smith said: “The group is probably experiencing the most extreme inflationary cost environment ever in this industry. As we move forward through the first part of 2022, it is encouraging that we expect the final quarter of our fiscal year to see our pricing actions move closer to maturity and activity to return close to balance at a level of EBITA and neutral cash flow.

“The outlook is of course highly dependent on our actions to achieve the essential and exceptional price increases currently under discussion with our customers, as well as other external factors such as the evolution of input costs and other inflationary pressures, and continued supply chain disruptions.

“The core business of the group remains strong and the dedication of the entire McBride team to solving the challenges we face is a strong demonstration of our values ​​and commitment to returning the group to profitability.”

On the markets this morning, the FTSE fell 0.5% to 7,449.6 pts following the escalation of tensions on the political situation Russia / Ukraine.

Besides THG, the risers include Science in Sport, up 2.7% to 60.6p, Glanbia, up 1.1% to €12.51 and Deliveroo, up 1.1% to 129p.

Fallers include McColl’s, down 11.5% to 7p, Coca-Cola HBC, down 6.8% to 2,158p and McBride, down 4.4% to 45.9p.

yesterday in town

The FTSE 100 started the week on the back foot, down 0.4% to 7,484.3 points.

THG fell a further 8.8% to 103.4p following reports of disputes between the company and major beauty suppliers.

Coca-Cola HBC also fell ahead of this morning’s results, down 4.5% to 2,315p, Finsbury Food Group, down 3.4% to 85.5p after posting lower first-half profits .

Other fallers included Just Eat, down 3.3% to 2,898p, Coca-Cola Europacific Partners, down 3.3% to €47.67, C&C Group, down 3% to 212.4p, Devro down 2.8% to 208p and Greggs down. 2.4% at 2,523p.

The few risers on the day included B&M European Value Retail, up 1.5% to 592.2p, Bakkavor, up 1.2% to 123p, McBride, up 1.1% to 48p, Associated British Foods, up 1% to 1,927p and Hilton Food Group, up 0.8% to 1,072p.


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