Studio Retail Group says it is confident about its prospects for medium-term growth following a first half in which its revenue grew by 17.2% and pre-tax profits by 199%, as shoppers took a stride online during the Covid-19 pandemic. It is now inviting potential offers for the business as part of a strategic review requested by one of its major shareholders, Frasers Group, which says it is undervalued.
The retail group, whose brands include RXUK Top500-listed Studio as well as Ace, today reported sales of £268m in the 26 weeks to September 25. That’s 17.2% up on the same time last year and came, said Studio Retail, as both customer numbers and demand rose. The group now has 2.3m customers, of whose 1.5m buy using its credit offer. Sales in its Studio retail business grew to £24.4m from £15m a year earlier, while its education division grew sales from £1m to £3.3m as schools bought from it online once they returned to work in September.
Top-line pre-tax profits of £17.7m were 52% up on the same time last year, and at the bottom line, after one-off costs of £2.7m, pre-tax profits came in at £15m – 199% up on the £5m it reported a year earlier.
Some 91% of retail sales now take place online – up from 81% a year earlier, while 20% of Studio purchases now come via its app, launched in October 2019.
The retail group says it was well-placed thanks to its transformation, over years, into a digital-first retailer. “Our growing customer base, coupled with strong processes and systems has meant we have been well- positioned to respond to record levels of activity during peak trading in recent weeks,” the retailer said in today’s half-year results statement.
Looking ahead, its third quarter figures are likely to come in well ahead of the same time last year since there are fewer discounts available, the company says. “The marketplace has been significantly less promotional than in November 2019 due to the second lockdown in England, which has led to a materially stronger profit performance to date in Q3 than last year. Product revenue in Q3 to the end of November is 32% ahead of prior year, with gross profit margins from product sales up 450bps.”
Studio Retail chief executive Phil Maudsley says: “These interim results are testament to the strengths of our digitally‐focussed value business and the ability of our colleagues and customers to adapt rapidly to change.
“Our strategy to grow the Studio customer base and increase our customers’ spend with us, supported by our flexible credit offer has delivered a record trading performance which underpins our confidence in the group’s medium‐term growth prospects.”
Studio Retail says that Frasers Group, which has a 37% stake in the business and is one of two major shareholders, has written to it to say it is “misunderstood by the market and as a consequence, significantly undervalued”. This, it says, “may be fixable over the long-term” but says the group “should conduct a strategic review”.
In response, Studio has appointed a financial advisor, Stifel Nicolaus Europe, after consulting with its other major shareholder, Schroder Investment Management, to carry out that review. One option might include its sale - and it is therefore inviting any interested parties to put forward any offers. However, it is not currently in discussion with any potential buyers and says there is no certainty that any offers will be made.