Fitch Ratings has affirmed the THG long-term Issuer Default Rating (IDR) at B+ with a stable outlook.
The respected credit rating agency provides independent opinions on the creditworthiness of issuers for the global financial markets.
Fitch predict revenue to decline 9.6 per cent in 2025, driven by the Ingenuity demerger, followed by annual growth of around 3 per cent over 2026-2027.
In the first quarter of 2025 trading – ended 31st March 2025 – total revenue fell 10.6 per cent to £375.6m, with THG Beauty suffering a 10 per cent drop to £223.6m and THG Nutrition falling 2 per cent to £147.8m.
They have also upgraded THG Operations Holdings EUR445 million Term Loan B’s senior secured rating to BB from BB- and removed it from Rating Watch Positive. The Recovery Rating is RR2.
The IDR reflects its moderate business scale and the established market positions of its beauty products in online retail, with its own and third-party brands offerings.
The rating also captures lower operating profitability than pure consumer product manufacturers. The upgrade of the senior secured rating reflects an improved recovery following a debt reduction in its amend-and-extend (A&E) transaction.
The stable outlook reflects Fitch’s expectations of continued EBITDA recovery in 2025.
A statement said: “The completed demerger of Ingenuity, together with the debt reduction, makes for a big rating headroom build-up in 2025, sufficient to accommodate strategy execution risks aimed at profitability expansion and the potential of weakening consumer demand in THG’s markets, especially the US.
“We project mid-to-high, single-digit revenue expansion for nutrition in 2025 before it normalises towards low-to-mid single-digits annually in 2026-2027.
“Revenue stabilised from 2Q24, after the very negative effect of discounted sales of old stock in the wake of a global rebranding of the company’s crucial Myprotein product.
“We expect the recovery to be driven by average selling price normalisation after the destocking and a further increase through the expanding offline sales channel. We assume a limited impact on US operations from tariffs, as most goods sold there are produced locally.
“We expect margins to improve towards their historical levels of 5-6 per cent from 2025 (estimated at 3.6 per cent in 2024).
“This improvement will be driven by a recovery in the margins of the larger in terms of EBITDA and more profitable nutrition business following average selling price normalisation and easing costs for whey.
“We also expect the EBITDA margin in beauty retail to be supported by THG’s strategic focus on more profitable products and markets, and further development of its own prestige brands. We assume profitability gains will be balanced by modest pressure from personnel and marketing expenses.”
Fitch’s analysis predicted THG would benefit from reduced interest costs following the A&E deal and materially reduced capex needs after the Ingenuity business demerger.
The credit rating agency added: “We project positive trading momentum in the beauty business to continue in 2025, supported by our expectations of a stable to moderate recovery in consumer sentiment in THG’s main markets, and the company’s increasing focus on more resilient and faster-expanding prestige skincare and specialist beauty products. “We also expect revenue increases to be supported by further investments in own brands. We assume THG beauty revenue growth would remain constrained by intense competition.
“We calculate EBITDA leverage will drop to 3.9x in 2025, due mainly to the reduction in debt, to GBP371 million (EUR445 million equivalent), following the completed refinancing but also the expected recovery in EBITDA.
“This will ensure ample rating headroom to absorb additional external shocks or potential acquisitions. We forecast further deleveraging from 2026, remaining below 4x, although subject to the company’s execution around profit stabilisation in its core nutrition business.
“We expect the company’s execution risks to moderate, based on the improvement in operating performance in 2024 from low profitability in 2023 and streamlined operations toward the two core businesses.
“We still assume there are risks to our 2025-2027 forecasts, but now expect THG to be better positioned to manage its balance sheet without material additional debt as the liquidity profile remains strong.