Losses deepen at retailer after subdued Christmas
TheWorks has seen losses widen after experiencing subdued activity over the Christmas period.
Revenue growth of 3.1% to £122.6m was delivered against challenging conditions where LFL sales had dropped by 4.9%. TheWorks also reported an adjusted EBITDA loss of £8.5m (H1 2023 – £6.4m) and faced headwinds due to inflation and rises in National Living and Minimum Wages.
The books and stationery retailer says it’s focused on cost reduction and margin growth in the short-term after seeing a dip in consumer activity over Christmas, which was due to increasing pressure on family finances, meaning many customers prioritised spending on food and essentials, whilst cutting back on gifting.
An extended period of discounting was seen across the sector in the lead up to Christmas, creating a highly competitive market. TheWorks saw ranges such as kids’ books not delivering as expected as well as experiencing “teething problems” at its distribution centre following the implementation of a new pick-process.
But trading has lifted post-Christmas following an “impactful January sale”, and the operational challenges in the warehouse have eased.
The cash position has also improved, with £18.4m of cash as of 14 January 2024 and TheWorks expects to end the financial year debt-free.
During the period the retailer has opened five new stores, completed 19 retrofits, three relocations and closed ten stores. This has delivered an annual rent saving of £500k.
Gavin Peck, Chief Executive Officer of The Works, commented: “Market conditions have been persistently challenging, putting pressure on our sales and profit performance in the first half and throughout the festive period. It is clear that many families celebrated Christmas on tighter budgets this year, and whilst we offered excellent value, we were not immune to this reduced spend. I am proud of the way that our colleagues have rallied together to deliver for customers during these challenging times.
“We have started the new calendar year on an improved sales trajectory, with a strengthened leadership team to drive forward our strategy and exciting Easter and summer toy ranges due to land later this year. However, we are also mindful of external challenges, including recent supply chain disruption in the Red Sea.
“Our focus for the remainder of the year will be on cost reduction, rebuilding margin and profitability, and conserving cash. It is necessary to take this action now to stabilise the profitability of the business during this challenging period, however we remain confident that our “Better, not just Bigger” strategy is the right direction for the business and will enable a return to sustainable growth in the long term.”
