The Hut Group needs own-brand and premium beauty edge to stay ‘ahead of rivals’: GlobalData

This week, The Hut Group (THG) reported a year-on-year uptick of 51% for fourth quarter (Q4) revenues – higher than the company’s previous guidance of 40-45% increases – pulling in €628.2m (£559.7m). Full-year 2020 revenues tallied up at €1.8bn (£1.61bn), with its beauty division representing €843.6m (£751.3m) of that total.

A ‘prime benefactor’ of online beauty shift​

“THG has been a prime benefactor of the shift to online retailing, exacerbated by the closure of stores and changes in consumer interaction throughout the COVID-19 pandemic,”​ said Mahya Agorlou, retail analyst at data and analytics specialist GlobalData.

The e-commerce firm’s focus on technology had “stood it in good stead to react to the sudden change in shopping habits”, ​Agorlou said.

Last year, the global online health and beauty market grew 40.4% to reach an annual market size of €124.4bn ($151.4bn), she said, highlighting the category as a clear area of high growth.

“THG, however, has not been alone in identifying this area of high growth – competitors such as Beauty Bay, Cult Beauty and Feelunique all stock a similar portfolio of brands,”​ Agorlou said.

But because THG had been heavily invested in expanding its reach, such efforts had placed it “ahead of rivals”,​ she said.

The Hut Group’s ‘aggressive expansion strategy’ in beauty ​

At the beginning of this year, The Hut Group acquired US online retailer Dermstore, a subsidiary of mass retail major Target, and in October last year it acquired premium anti-ageing US skin care brand Perricone MD​. In June 2020, a flurry of beauty brands also partnered with the e-commerce major​ to expand online, including Elemis, PZ Cussons Beauty and Burt’s Bees.

“The Hut Group has employed an aggressive expansion strategy – including high-end US skin care retailer Dermstore from Target – to get ahead in this fragmented market,”​ Agorlou said.

“However, to protect itself and meet its lifted sales expectations, it is pivotal for The Hut Group to further expand on its offering on own-brand and premium-end beauty products to deepen its customer base and cultivate loyalty as more players enter the crowded market,”​ she said.

The Hut Group executive chairman and CEO Matthew Moulding said 2020 had certainly been a “transformational year”​ for the company and that it would remain focused on rapidly growing its workforce and continue to build business and growth strategies in 2021 and beyond.