Retailer’s shares crash on fears of difficult Christmas ahead
Shares in TheWorks crashed more than 30% this morning after the retailer warned it does not expect a merry Christmas.
It now expects profits to be around £6m – well below its previous forecast of £10m, which was showing no improvement on last year.
Shareholders reacted to the profit warning with a sell-off, as the price slumped below 25p in early trading.
TheWorks floated on the London Stock Exchange at 160p-per-share in July 2018, valuing the retailer at £100m. After this morning’s fall, the company has a market value of just £17m.
The books, stationery and gifts retailer, which could be described as a stocking fillers specialist, has already increased its promotional activity and expects to have to continue this into the peak Christmas trading period. It has also taken “mitigating action to reduce costs where we can”.
However the Sutton Coldfield-headquartered company has warned of “a high degree of uncertainty” about its Christmas trading forecasts because it expects shoppers will repeat last year’s behaviour of leaving purchases “until very late in the season”.
Chief executive Gavin Peck said: “Consumer sentiment softened towards the end of the period, which resulted in early discounting across the sector and increased uncertainty as we head into the Christmas period. Recognising the competitiveness of the market we have responded with more promotional activity, which we expect to continue as we approach Christmas.”
Peck said he believed the company’s “‘better, not just bigger’ strategy has the potential to deliver profitable growth in the medium and long-term”.
Russ Mould, investment director at AJ Bell, described it as “the Nightmare before Christmas” for the high street retailer.
He said: “The company was meant to be a champion in the cost-of-living crisis, selling cheap products to people who have been watching every penny. The idea of getting a big discount on a toy or book would appeal in such economic conditions. Sadly, its tills aren’t ringing as expected.”