Studio Retail today reported a strong lift in sales as customers moved online during the Covid-19 lockdown to buy products from toys and games to electricals. The group said it was well placed to respond to changing customer behaviour thanks to its previous moves towards online retailing.
The company, which operates the Studio retail brand, said that product sales over the first 11 weeks of its new financial year were 55% up on the same time last year. Shoppers wanted to buy toys, games and electricals as well as fitness and garden products.
Both new and existing customers bought, taking active customer numbers to 2m. The retailer reduced marketing spend but focused what it did spend on digital and TV, bringing increased traffic to both the Studio website and app.
The retailer, ranked Top500 in RXUK Top500 research, outlined in a trading update today a Covid-19 strategy of matching inventory buying to customer demand. It cut its in-season stocks, in particular of clothing and garden furniture, ahead of the reopening of high streets in England this week.
Phil Maudsley, chief executive of Studio Retail Group, said: “Studio’s multi-year transformation to become a digital value retailer means we have been well-placed to adapt to the current environment.
"The group’s response to the lockdown has been exceptional, not only with our strong trading performance and relevance to customers’ needs, but also via our internal agility in responding to the operational challenges presented by Covid-19.”
He added: ”I have been particularly pleased by the number of new customers we have welcomed to Studio in recent weeks. Customers who have never shopped with us before have been impressed by the choice, value, and service we have to offer. Whilst we will face increased competition from the high street over the coming months, we are confident that the strength of our offer will continue to resonate amongst value-conscious shoppers.
"The overall market does remain volatile, and we are cautious about the risks to customer incomes for the remainder of the year. However, we have positioned ourselves strongly to manage these risks, and longer-term, we are well-positioned to respond to any permanent shifts in online consumer behaviour."
The retail group also says that it has received requests for forbearance on 4% of customer-owed balances and it added: “We anticipate that this, and the level of customer arrears, may worsen later in the year if unemployment levels increase materially,” it said. “We have recently agreed in principle, minor, short-term variations to the securitisation agreement to help mitigate these Covid-19 related impacts.
The group’s own net debt stood at £30m as of June 12, down from £52.3m at the end of March. “This,” said the retail group in today’s trading statement, “is due to the continued strong trading at Studio noted above, and our continued cautious approach to discretionary expenditure and stock intake. At present, with committed headroom of c. £55m, the group has sufficient liquidity for its near-term requirements without requiring recourse to government funding schemes. We have strong relationships with our lending banks and we continue to plan for a medium-term refinancing.”
Studio Retail is currently looking to focus purely on retail, and plans to sell its Findel education business. However, the Competition and Markets Authority today said today that it was concerned about the proposed sale of Findel Education to the Yorkshire Purchasing Organisation, since they were already the second and third largest general educational distributors, and is referring the deal to a phase two investigation. In response, Studio said demand in this sector had been lower than normal due to school closures and it would keep the overheads in the business under close review in coming months.