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ALEX BRUMMER: Reality check at the Hut as share price turns a corner

EconomyALEX BRUMMER: Reality check at the Hut as share price turns a corner


Reality check at the Hut: As THG’s share price finally turns a corner, ALEX BRUMMER ponders the future for the fallen tech star

Here is something deserving attention. An analyst update from online beauty and protein site The Hut Group (THG) actually moved a depleted share price upwards.

In spite of above-forecast revenue growth for both major categories, founder Matt Moulding has decided at this stage of the economic cycle, with ingredient prices on an upward spiral (especially for whey), it is better to take the hit on margins than alienate customers by full price recovery.

THG feels better able to absorb some of the hit because its robot warehouse in Manchester is blessed with low labour costs.

THG founder Matt Moulding has decided at this stage of the economic cycle it is better to take the hit on margins than alienate customers by full price recovery

THG founder Matt Moulding has decided at this stage of the economic cycle it is better to take the hit on margins than alienate customers by full price recovery

The back story is that new chairman Charles Allen appears to be getting a grip on governance and financial pratfalls.

Disclosure that there have been at least two private equity firms, Advent and US retail specialist Leonard Green (once partners with Philip Green in the US), sniffing around will do no harm.

It is certainly a more encouraging narrative than pointing the finger at short-sellers as the share price imploded, slumping 88 per cent over 12 months.

What may be helpful in turning the tide for THG is a rethink around its electronic platform, Ingenuity. 

Moulding thought it would be a good idea to split out the platform, deployed by a number of beauty brands such as Elemis and PZ Cussons, from online sales. 

There has been difficulty in segmenting the accounting data from Ingenuity from the rest.

This lack of clarity has been a setback. There is likelihood now that the whole separation plan will be axed.

THG believes it has enough cash in hand to plough ahead without having to rely upon Softbank exercising an option.

There is also recognition by Allen that a board stuffed with legacy private equity connections has proved an error. 

An intense search is underway for some recognised outsiders seen as capable of keeping the entrepreneurial enthusiasm of Moulding in check. 

It is a pity that an impressive line-up of City investment bankers led by Goldman Sachs didn’t highlight this before extracting big fees at the time of the initial public offering in September 2020.

Better late than never.

Black gold

As recently as last November, when Glasgow was consumed by Cop26, big oil was relegated to the outer darkness.

How speedily times change. At a moment of locked down desolation on the Shanghai stock exchange, shares in Chinese state oil firm CNOOC shot up 44 per cent on debut. Forget ESG, offshore oil exploration is back again.

In the last six months, Shell shares have risen 35 per cent and more green-minded BP (despite a Russian hit) are up nearly 20 per cent.

With Russian oil increasingly regarded as cancelled and Middle-East producers unwilling to open the spigots, the US, the world’s largest oil importer of the 70s and 80s, is picking up the slack.

New data shows that US oil exports, bolstered by fracking in West Texas and the release of reserves from stockpiles, have climbed to their highest level in two years.

John D Rockefeller, who at the turn of the 20th Century controlled 90 per cent of the world’s crude through Standard Oil of New Jersey, would be proud. 

As Germany and others seek to run down dependence on Russia, the America exports to Europe have climbed sharply in recent weeks to 4.3m barrels a day.

That is almost the equivalent of the 4.7m barrels a day that Russia was selling to the OECD developed nations before its villainous war on Ukraine.

How irrelevant Extinction Rebellion attacks on Big Oil now appear amid mayhem in Ukraine, a cost of living crisis and the cruelty of energy poverty.

Higher orbit

Elon Musk is much disparaged over his eccentric pursuit of Twitter in the name of free speech.

By now, his critics should have recognised that in his relentless quest of unreachable goals, he mostly comes out on top.

When Tesla launched its challenge to Detroit, Stuttgart, Turin and Tokyo in the e-car space, few gave him a chance of displacing incumbents. 

Yet record deliveries in the pandemic together with a forecast of 50 per cent annual delivery growth over each of the next several years leads other motor manufacturers – seeking to cash in on EV enthusiasm – looking pedestrian.

Unlike some other online enterprises such as Netflix, now gasping for air, Musk heads for the stars.

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