THG Returns to FTSE 250 Boosted by JP Morgan Upgrade and Strong Performance

Online retail giant THG has marked a significant milestone with its return to the FTSE 250 index today, 24 September. This positive development has been further bolstered by a renewed vote of confidence from financial services powerhouse JP Morgan, which has upgraded its outlook on THG following a strong showing in its recent half-year results.

JP Morgan's revised assessment saw THG’s stock elevated from an "Underweight" to a "Neutral" rating. This upgrade, a direct indicator that the bank now predicts THG’s stock will perform in line with the broader market rather than underperforming it, immediately resonated in the market, sparking a 4.5% increase in the retailer’s share price on Tuesday.

The upgrade by JP Morgan comes on the heels of a notable surge in THG’s valuation over recent weeks. This upward trend has culminated in the firm achieving a market capitalisation of £532 million, a direct reflection of its positive half-year performance. Despite this recent momentum, it's important to contextualise that the current share price and market-cap still sit considerably below THG’s initial public offering (IPO) valuation of £5.4 billion back in 2020.

In an insightful analyst note, JP Morgan articulated the rationale behind its shift in stance. "We see the tide turning post a period of strategic evolvement," the note stated, indicating a pivotal change in the firm's perception. The bank admitted, "Having been sceptical on the equity story for past three years, and maintaining our UW (Underweight) through the last two, we close our cautious stance on THG and upgrade to Neutral, with the share price having meaningfully corrected over the period, while at the same time we see first signs of improved performance following a period of extensive strategic evolvement.”

Operationally, JP Morgan observed a clear building of "trading momentum." The business is actively benefiting from an enhanced operational model across its key segments. In the Beauty division, this includes the strategic disposal of certain operations, significant investment in own-brand development, and a focused prioritisation of key retail territories. Similarly, the Nutrition segment has seen a successful Myprotein rebrand, strategic expansion into offline retail, and an evolution of its business model within the Asian market. These comprehensive changes are projected to lay the groundwork for "sustainable and accelerated growth into year-end and FY26."

From a strategic perspective, THG has also made crucial advancements. The demerger of its THG Ingenuity technology arm has effectively refocused management on core operations, streamlining the business. Coupled with recent disposals, such as the sale of Claremont, enhanced asset optionality, and a projected cash generation of £28 million in Free Cash Flow (FCF) by FY26E, JP Morgan anticipates an "improved balance sheet position and path to net cash in FY29E."

These strategic moves have been evident in THG’s recent corporate actions. At the beginning of 2025, THG successfully demerged its loss-making Ingenuity technology division. Furthermore, in August, the company completed the sale of Claremont Ingredients to Nactarome Group for a substantial £103 million, a move primarily aimed at reducing its overall debt. This particular sale has also ignited speculation that CEO Matt Moulding may consider further disposals in the future, with reports suggesting an ambition to drive the company’s net debt to zero.