THG shares crash 15% after EU parcel duty warning offsets strong H1 profit beat

THG shares fell as much as 15.8% after the company warned that new EU €3-per-parcel import duties would slow Q3 revenue growth to about 2%, despite H1 adjusted EBITDA more than doubling to £42.8 million and revenue rising 7.2% to £828.7 million in constant currency. THG still expects Q4 growth of 6%-7% and maintained full-year consensus targets of £1.80 billion revenue and £101.7 million adjusted EBITDA, while reporting a £43.7 million statutory net loss and £329.7 million of net debt. Nutrition margins improved despite elevated whey prices, but heatwave-related demand softness and delayed Beauty own-brand revenues add near-term uncertainty.

Analysis

The selloff is less about the near-term revenue interruption than a renewed challenge to THG’s equity story: operating-margin progress must now outrun fixed financing costs and persistent working-capital consumption. With net debt still substantial relative to expected EBITDA, a modest miss to the fourth-quarter reacceleration path could disproportionately pressure the equity through both lower EBITDA estimates and a higher perceived refinancing risk premium. The prospective VAT receipt is liquidity-supportive, but should not be capitalized into valuation until cash is received and management demonstrates that it reduces net debt rather than funds ongoing cash burn.

The parcel-charge effect also creates a competitive asymmetry. EU-warehoused nutrition and beauty sellers, including Zalando (ZAL) in beauty-adjacent categories and local supplement brands, can market faster and potentially cheaper delivered pricing into continental Europe while THG absorbs, passes through, or subsidizes the charge. Nutrition is especially exposed because repeat purchasing makes even a small per-parcel friction visible in customer lifetime value and promotional intensity; this could delay the conversion of lower whey costs into gross-margin expansion over the next 6-18 months.

Consensus appears to be treating the fourth-quarter growth rebound as a timing issue. The more important falsification point is whether customer acquisition cost, repeat rates, and Nutrition contribution margin recover alongside revenue: a rebound driven by discounting would preserve the top-line guide while undermining free-cash-flow credibility. Conversely, verified receipt of the VAT cash and stable EBITDA despite the third-quarter disruption would remove the most immediate liquidity overhang and could catalyze a sharp short-covering move in a heavily discounted UK consumer-internet equity.

Key Decisions for Investors

• Do not buy the initial THG weakness solely on the EBITDA beat. Set a watch trigger for a long position only after evidence of fourth-quarter growth reacceleration without elevated promotional expense; target a 3-6 month holding period, with thesis invalidated by a full-year EBITDA guide reduction or further net-debt increase.
• For existing THG exposure, reduce gross until the VAT repayment is received in cash and management specifies its use. Treat delayed payment beyond the next reporting cycle, or revolving-credit-facility drawdown, as a balance-sheet warning that warrants exiting rather than averaging down.
• Express the competitive-distribution angle through a 1-3 month pair: long ZAL / short THG in equal beta-adjusted notional, particularly if European parcel-cost pass-through becomes broad. Cover the short leg if THG reports stable Nutrition repeat rates and gross-margin expansion despite the new charge.
• Monitor whey prices and THG Nutrition gross margin quarterly. A sustained decline in whey inputs coupled with no margin conversion would signal price competition or customer-acquisition pressure; that outcome is bearish THG even if reported revenue growth recovers.