The Works reports rising first-half and Christmas sales as shoppers opt for value and return in store to buy – but says postal strikes hit ecommerce in the run up to festivities.
The value books-to-crafts retailer says there was a “stronger than expected” return to store post-Covid, with online sales lower than a year earlier, but still higher than before the pandemic.
The Works today reports revenues of £118.9m in the six months to October 30 2022. That’s 2.4% up on the same time last year. Sales on a like-for-like basis, which strips out the effect of store, and business, openings and closures, were 0.6% up on last time. Online sales of £15.1m were £3m, or 16.9%, lower than a year earlier, while store sales were 3.5% higher than last time at £114.7m.
It also reports a pre-tax loss of £10.7m – up from a loss of £1m a year earlier. The retailer says it typically makes a pre-tax loss in the first half of the year before moving into profit over Christmas. It also says that sales growth was weaker than expected, while costs rose significantly in the face of rising business rates, freight, payroll and energy costs.
Christmas trading
In the first 11 weeks of the current financial year, to January 15, LFL sales grew by 5.7%. Store LFL sales were 9.7% up on last year, with online sales down by 14.0%.
Online sales, says The Works, have continued to be disappointing. It believes “soft” commerce sales in the run up to Christmas was “due to consumers losing confidence in retailers’ delivery promises in light of the widely reported postal strikes, and the potential for knock-on effects on other carriers.” While online sales were 16.9% lower than the previous year, they were still 50% higher than before Covid-19.
Sales in stores – where 85% of The Works’ sales take place – were strong and continued to be so in the January sale. The Works says markdowns were higher than the previous year, when stock levels had been unusually low, but that it now expects to end its financial year in a clean stock position. “Store sales,” says The Works in today’s financial statement covering the 26 weeks to October 30 and the 11 weeks to January 15, “were particularly strong in the week immediately prior to Christmas, suggesting that consumers shopped much later than in 2021 and that many were seeking value when shopping for gifts.”
Multichannel strategy
The retailer now expects trading to be stronger as it launches new brands and seasonal ranges. It is operating a strategy of being “better, not just bigger,” and has widened its book titles, while offering products from third-party retailers as well as its own brand ranges. It opened seven new stores and relocated two during the period while improving operations through a new stock allocation system, improved IT systems following a cyber security incident in the spring, and put a new automated packing machine and robotics in place in its online fulfilment operations, run by third-party iForce. “This automation, it says, “is key to ensuring we can maintain online profitability given the continued headwind from National Living Wage increases.
Gavin Peck, chief executive of The Works, says: “The Works delivered a resilient performance in the first half against the backdrop of an increasingly challenging consumer environment. This reflects the durability of the business, the relevance of our value proposition, the progress we are making in delivering our ‘better, not just bigger’ strategy and the relentless efforts of our fantastic colleagues. We have not been immune from the economic headwinds affecting the retail sector, including higher costs which impacted our profitability in the first half more than last year. Although trading conditions were more difficult, we were still pleased to see cost-conscious customers buying into our value offering, which enabled us to deliver positive sales growth overall.
“Whilst the trading environment remains uncertain, we are encouraged by the strength of our performance during and after the key Christmas period and believe there is significant value to be created from delivering on our strategy in the medium-term. This is what we will be focussing on during the upcoming period, and we feel well placed to capitalise on the many attractive opportunities that lie ahead.”
The Works is ranked Top100 in RXUK Top500 research.
