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Studio Retail looks at cashflow options as it counts the cost of stocking up for Christmas

Studio will be able to get back to business after its acquisition by Frasers Group. Image courtesy of

Studio Retail is looking at its options to find short term working capital following a January in which sales have been subdued – but in which it still has higher than usual levels of stock left over from Christmas. The retailer says it needs to raise prices to offset the effect of inflation on its costs.

The retail group, which trades through its Studio and Ace retail brands, paid higher shipping and port costs to stock up ahead of Christmas in the face of industry-wide supply chain issues, adding charter ships to its already contracted container shipping. Sales in the 13 weeks to December 24, the third quarter of its financial year, were well ahead of two years earlier (+18%) but lower than the same time last year (-10%), a period in 2020 when shoppers bought online because non-essential shops were closed in Covid-19 lockdowns and trading restrictions. Sales in the first eight weeks of the quarter were 21% down on the previous year, but the final five weeks of the quarter, including Black Friday, were 9% up on the previous year, following stock deliveries.

In context

In an October 2021 trading update, Studio Retail said it was in a “strong stock position ahead of peak, with inventory levels approximately 10% ahead of last year”. But it warned that delays on a small number of ranges could affect availability in peak season.

Now it says it has stock left from late deliveries and that shoppers may no longer be keen to buy in “a period when consumers traditionally spend less on discretionary retail, and this is likely to be compounded due to the higher living costs, notably fuel and energy price increases.” Nonetheless the retailer says it needs to raise prices in this quarter and into next year to counter the effect of inflation on its costs.

The retailer now predicts that adjusted pre-tax profits for the full-year will be in the range of £28m to £30m, but it is looking to fresh working capital so that it can both carry higher than usual levels of inventory and buy fresh stock well ahead of time at a time of supply chain “nervousness”. Studio Retail currently has a fully drawn credit facility of £50m and says it remains well within its gearing convenant. It is taking steps to increase liquidity while managing the pace of medium-term capital investment.

Paul Kendrick, group chief executive of Studio Retail, says: “The fundamentals of Studio’s business model are solid, notwithstanding the market challenges that have been exacerbated by our over-commitment to stock in the near term. The trading performance over Christmas, with sales up 18% over two years, shows our offer is resonating with a customer base of 2.3m. We will continue to drive the long-term profitability and success of the group.”

Looking ahead, the retailer expects disruption to supply chains to last throughout 2022 and that it will need to take a “more stringent approach to operating costs in FY23 to ensure we can continue to maintain greater value products to our customers and further reduce working capital requirements”.

Studio is a Top350 retailer in RXUK Top500 research.

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