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THG Turmoil Continues as Co-Founder of Cult Beauty Resigns

Published April 18, 2022
Published April 18, 2022
Cult Beauty

The bad news keeps coming at THG. Eight months after the company acquired the premium e-commerce beauty site Cult Beauty in a £275 million ($382.91 million) deal on a cash and debt-free basis, co-founder and co-Chief Executive Officer Alexia Inge resigned. At the time of the transaction, THG said Cult Beauty branding and identity would remain intact and that the THG infrastructure would be used to spearhead international expansion.

Cult Beauty was a pioneer in the online beauty space, stocking niche brands and categories, showcasing brands with editorial flair, and steering well clear of discounting. The site spoke directly to the beauty obsessed, reported regularly on seasonal and consumer trends, and remained sensitive and responsive to the needs of its audience.

For consumers, Cult Beauty is a destination to discover a curated assortment of the hottest niche brands in beauty. For brands, the retailer was a solid partner that nurtured relationships with over 300 vendors and fueled growth with content and customer service rather than discounting. As with most entrepreneurial businesses, this was an extension of the culture and team that was built over 15 years of business.

Officially, Inge stated personal reasons for the departure, and described the sale as "a seminal milestone in the company's history. I am excited to watch the next chapter for the business as it grows from strength to strength in its superb position as part of the THG Beauty portfolio." However, the news comes amid employee chatter that the culture of Cult Beauty has deteriorated; morale is low and employees are heading for the exits in droves.

Current and former staff of Cult Beauty told The Sunday Times that the culture at the company had deteriorated since the takeover. "It seems like every week, someone is leaving," said a current employee. "People are being driven to breaking point, ringing each other up and crying." The employee added that "brands are not being paid as they used to be."

At the time of the deal, most of the 300 Cult Beauty brand partners had no other presence on THG beauty sites. Talk of non-payment of invoices has been circulating in the industry for months. Cult Beauty has a reputation for paying invoices promptly at 60 days, but post-transaction brands are having a hard time getting paid, compounded by lack of communication. A period of transition is expected, but after eight months brands are left chasing THG for money as calls and emails go unanswered, which is stressful for indie beauty brands.

THG was founded in 2004 by Matt Moulding and John Gallemore as an online CD and DVD retailer that has since evolved into a beauty and nutrition business with 300 websites and 10,000 staff. In September 2020 THG floated in London at a £5.4 billion value and an £840 million payday for Matt Moulding. After the much-hyped IPO and a short-lived rally, shares have tumbled amid concerns over governance and profitability. Last week the stock closed at 93.77p, valuing THG at £1.1 billion.

Soon after the acquisition of Cult Beauty, THG announced last September its plans to spin off its beauty division, which represents 48 percent of group revenues during the first half of 2021. THG is due to report full-year results on Thursday. In January, it said sales for last year would be £2.2 billion, a 37.9 percent increase.


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