The etailer, with sites ranging from health and beauty to entertainment, describes itself as a “nimble giant with a start-up culture”. What do its latest results reveal about its strategy?
Profit and margins
The pure-play business, which posted a 67% leap in EBITDA to £50m in its full-year results, has embarked on a strategy of boosting its own-brand offering and portfolio of brands to improve profit margin in recent years.
Own-brand products made up just over half of the retailer’s group sales during the period, which will have boosted its profit margins because sale of products such as protein powders and health supplements through sites such as Myrpotein have low production costs and high mark-ups.
The Hut Group’s 10% profit margin will also have been bolstered by its clutch of beauty brand acquisitions.
Beauty brands such as Grow Gorgeous and The Hut sites such as Skinstore.com will have offered The Hut greater access to shoppers who make regular purchases with a low level of returns on specific beauty items.
Group and international sales
The split in the etailer’s UK and international sales was largely even just a year ago, but since then its overseas operations has outstripped domestic growth substantially.
International sales rocketed 89% and comprised 63% of a total of £501m in group sales.
The Hut’s international division comprised just 26% of its group sales five years ago but has been growing at pace since then.
The retailer has invested substantially in bolstering its international offering to drive that revenue rise, and it operates in 47 languages, as well as accepting 30 different currencies and 23 different payment options.
The retailer has also invested in opening a distribution facility in the US to increase its delivery capabilities there, and acquired several international businesses to increase its overseas reach.
The Hut Group hit the acquisition trail hard during its last financial year, and shelled out £63m on snapping up businesses “targeted at specifically developing [its] own-brand proposition as well as geographical reach through its beauty supply chain.”
”Salu Beauty and Ideal Shape, show an increased focus on the and wellbeing-beauty conscious female shopper”
There are a number of benefits for The Hut in increasing its presence in this market internationally, not least that it provides access to a sector of the health and beauty market that not only delivers high levels of repeat purchasing, but generally low levels of returns.
The health and beauty etailer shows no signs off taking its foot off the pedal in terms of acquisitions and expanded its credit facility in January to £345m to fund future purchases and initiatives.
The online retailer’s £50m EBITDA during last year was dwarfed by the £252m of investment it ploughed into its business.
“The Hut does not see any signs of international growth abating in the years ahead”
The bulk of The Hut’s investment (£153m) went into expanding its UK and international infrastructure, with two food production and distribution warehouses commissioned in Cheshire and Kentucky in the US respectively.
It also invested £91m in its technology platform, which it uses to sell online in more than 190 countries.
The online retailer said investment its ecommerce platform would “further enhance its functionality and globalisation capability”.
This, alongside £63m invested in overseas acquistions, indicates that The Hut does not see any signs of international growth abating in the years ahead.
Closer to home, The Hut Group expanded its UK workforce by 1,200, including 400 graduates as part of its goal to be “the number one place for ambitious new talent.”
To that end The Hut also opened launched the THG Academy during the period, an in-house accelerator programme designed to strengthen the ecommerce skills of its staff.
The etailer is clearly determined to follow last year’s growth with much more.