THG Q4 Earnings Call Highlights

Core Insights - THG plans to expand its store footprint cautiously, with a focus on partnerships for capital expenditures rather than solely funding openings [1] - The Lookfantastic physical store in Altrincham has performed exceptionally well, exceeding initial expectations and positively impacting online sales [2] - THG Beauty reported a 6.4% revenue growth in Q4, driven by strong performance in the UK and Ireland, marking the company's first full-year growth since 2021 [5] Store Expansion and Performance - Management indicated that a new store in Bristol is planned but has faced delays due to fit-out issues [1] - The Lookfantastic store has generated a "halo effect" for online sales, performing better than anticipated [2] Financial Performance - THG reported a group revenue growth of 7% in Q4, with a successful Cyber trading period contributing to an 8% revenue increase in November and December [6] - The company ended 2025 with significant momentum, achieving a record second half that was 14% above the top end of guidance [7] Segment Performance - THG Nutrition experienced an 8.5% revenue growth in Q4, with Myprotein maintaining its position as the leading sports nutrition brand [8] - Excluding Asia, Nutrition growth would have been 12.2%, highlighting the impact of foreign exchange headwinds [9] Commodity Costs and Profitability - Elevated whey prices have pressured profitability, with an estimated GBP 65 million of annual profitability affected since the IPO [10] - Management expects commodity prices to normalize over time, while strong global demand for protein presents a market opportunity [10] Marketing and Cash Flow - Increased marketing investment of approximately GBP 3 million in Q4 was aimed at capitalizing on improved customer dynamics [12] - Management expects to generate GBP 20 million to GBP 25 million of free cash flow in 2026 based on current EBITDA expectations [14] VAT Dispute and Future Priorities - THG is involved in a VAT dispute with HMRC, with potential repayments increasing from GBP 30 million to GBP 55 million [16] - For 2026, THG aims to enhance digital leadership in Beauty and continue global offline expansion in Nutrition [17]