THG Holdings (LSE:THG), also known as The Hut Group, finally went public in September after deciding this would help it access the capital it needs to grow. Despite a short-term drop in its share price after its £5.4m valuation at initial public offering (IPO), the THG share price has rebounded nicely and is now up 29% since then. Being a technology stock (as well as a retail one), this should come as little surprise to those following the markets over the past year.
A tech stock to watch
Tech stocks soared throughout 2020, but with few high-quality tech companies available in the UK, The Hut Group is at an added advantage. In fact, this no doubt boosted the success of its IPO, which was the biggest to happen on the London Stock Exchange since Royal Mail in 2013.
THG’s successful business model and an array of brands under its belt undoubtedly add to its appeal. Many investment funds jumped on board with the IPO and continue to profit from its rise. Some notable brands sold under The Hut Group include MyProtein, LookFantastic, and GlossyBox. MyProtein is a high-flying nutrition brand, while ESPA and LookFantastic are increasingly successful in the beauty market. Nevertheless, the biggest appeal to fund managers and investors is its exclusive technology platform Ingenuity, which it uses to organise and control the IT and e-commerce logistics of third-party brands such as Hotel Chocolat and PZ Cussons.
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Growing through acquisitions
THG is also on the acquisition trail, snapping up four successful independents in recent months. The most recent is Dermstore, a beauty retailer and (until now) subsidiary of US retail giant Target. THG is purchasing Dermstore for £259m to help it dive further into the US market. Prior to this, THG acquired Perricone MD, a luxury skincare brand for over £44m in September. It’s also buying David Berryman and Claremont Ingredients for £59.5m. These are two of the main suppliers of its nutrition product ingredients. They’re based in the UK and will help streamline THG’s business model while increasing its income stream.
Rapid recruitment drive
THG’s market-share across the UK and Europe accounts for around 60% of its sales while Asia and North America are also big business for the group. As well as growing through acquisitions, it’s building solid brands in covetable niches. It’s also strengthening its relationships with lucrative third parties that bring further value to the company.
Further to this, I’m particularly impressed by THG’s recruitment drive and dedication to graduates and apprentices. It offers them a chance to try out various roles in the business until they find a good fit. I think this reflects well on the company ethos and encourages long-term commitment from recruits. THG plans to increase this programme three-fold in 2021. It’s been on a major recruitment drive over the past year and is now developing an in-house Skills Academy. This is particularly focused on retraining candidates affected by the Covid-19 pandemic.
I think the future outlook for The Hut Group looks great. I imagine the THG share price will continue to thrive and I’m interested in buying shares in what I believe is a growth opportunity.
