High street retailer looks to bounce back after drop in profits

High street chain The Works is forecasting a return to profit growth after enduring “a year of considerable change”.

The value retailer expects adjusted annual profits, as measured by EBITDA, to be around £6m – in line with expectations but £3m lower than the previous year.

However it is planning to bounce back, and has said it expects to achieve earnings of £8.5m in this financial year although it is preparing for “stable sales”.

The Works now has 511 stores, having opened nine but closed 24 sites during the year, although still has around 20 loss-making sites. Its physical stores generate 90% of the retailer’s income.

Revenues were broadly flat for the 53-week trading period to May 5, with total revenues up 0.9%, to £282.6m, but like-for-like sales down 0.9%.

Gavin Peck, The Works

Gavin Peck, chief executive of The Works, said: “We are pleased to have finished FY24 in line with market expectations, which reflects action taken to reset our cost base and improve margins, supported by improving store sales in the final quarter.

“Significant changes implemented across the business make us well-placed to offset cost headwinds and we expect to return to profit growth in FY25.”

The stock market-listed retailer has moved from the Main Market to AIM, to benefit from less regulation and lower audit fees.

Operationally, it is sought cost savings and has moved its online fulfilment centre, ended its loyalty scheme, negotiated rent savings on leases, and improved product margins.

The company said that although it had started to deliver improved margins and lower costs in the final quarter of the financial year that has just completed, “most of the benefits from this activity are expected in FY25”.