The online retail and technology giant, THG, has recently faced yet another setback as Fitch Ratings downgraded its rating. This downgrade has caused a decrease in THG’s share price, with a nearly 4% decline on Thursday and an additional drop of 2.2% on Friday. Although the stock has slightly recovered, there are concerns about the company’s long-term Issuer Default Rating outlook.

The downgrade by Fitch is mainly due to worries about significant challenges in material costs, including logistics, energy, and raw material prices. The credit rating agency also predicts increased competition as trading conditions return to normal post-pandemic. This could result in profit margin softness and negative free cash flow for THG in 2022.

Over the past year, there has been a substantial decline of almost 88% in THG’s share price. Negative headlines have played a part in this decline, particularly reports of beauty suppliers limiting their stock supply due to concerns about THG’s discounting practices. Suppliers like Dermalogica have allegedly restricted supplies to THG to protect their own prices. However, THG has debunked these reports, stating that they are merely “media speculation” and that there is no identifiable reason for the decrease in share price. The company maintains that there are no trading restrictions with key suppliers to its beauty division.

THG, under the leadership of CEO Matthew Moulding, owns several popular beauty websites such as Lookfantastic, Dermstore, and Cultbeauty. These websites have experienced rapid growth, thanks to investments in digital marketing and social media promotion. The success of THG has attracted the attention of private equity firms, with hints of potential buyout interest from representatives of Advent International and Leonard Green.

Despite the challenges and negative press, THG remains a significant player in the online retail and technology industry. The company’s portfolio of beauty websites continues to attract customers through strategic marketing efforts. However, to maintain its position in the market, THG will need to successfully navigate the increasing competition and cost pressures it faces. Investors will undoubtedly keep a close eye on the company’s performance and future developments as it confronts these obstacles.

Useful links:
THG Official Website
Lookfantastic Website