ONE10 Oct 2021 18:19
The first anniversary of The Hut Group’s stock market float should have been a celebration for Matt Moulding. Instead, the muscle-bound entrepreneur watched on as shares in his Manchester-based beauty and health retail empire, which listed in September 2020, soon went into freefall amid growing doubts over the business and its increasing focus on its recently launched tech arm, Ingenuity.
Moulding’s vision was ripped apart earlier this month by an influential research firm that expressed doubts over Ingenuity and raised questions about The Hut Group’s culture and corporate governance, as well as concerns over free cashflow and a series of acquisitions.
The Analyst, a firm founded by Mark Hiley, a former equity analyst at funds giant Fidelity, circulated a note among its fund manager and hedge fund clients, advising them to short the shares — in other words, bet that they would fall.
Shares in The Hut Group (THG) were changing hands for 684p just over a month ago. After the recent slump, they are languishing at 452¾p, still valuing it at about £6.2 billion. Jack Stonehouse, the analyst behind the THG short report, predicted the shares would dive to 260p within two years. His gloomy prediction coincided with a sector slide as investors dumped shares in online retailers such as Boohoo, Asos and AO World, which all trade on high earnings multiples.
The Analyst has a decent record, having previously said that shares in Debenhams and construction company Carillion were worthless; both later collapsed. It was also one of the early critics of Wirecard, the German payments giant brought down by a massive fraud.
On Tuesday, Moulding, 49, faces his day of reckoning as THG is holding a capital markets event. This is typically an occasion for companies to set out their strategy, but Moulding’s task will be to convince shareholders to ignore the concerns in The Analyst report and keep the faith. So what are the arguments in play?
Moulding’s masterplan
The ultimate goal for Ingenuity is running automated warehouses. THG has just launched FIR/ST, which stands for Fulfilment & Inventory Retrieval/Storage Technology. THG, founded by the once-Instagram-friendly Moulding in 2004, hopes to automate logistics in the same way that the online grocer Ocado has automated groceries. A source close to the company compared it to “taking the Ocado model and putting it on acid”.
Tuesday’s online event is centred on this business. Moulding and his right-hand man John Gallemore, who runs Ingenuity and is chief financial officer of THG, will spend a great deal of time explaining what Ingenuity is and why they are moving away from running health and beauty websites and into outsourcing. Their pitch will go something like this: while most large rivals, such as Salesforce and Shopify, help companies to build websites, Ingenuity will help companies outsource everything. That means operating warehouses and distribution, building and running e-commerce websites,
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