The Works says it has started to see its online sales stabilise after falling back from pandemic peaks. It now sees a “significant opportunity” for ecommerce growth medium term for a channel that is now 50% larger than before Covid-19.
The discount books to arts and crafts retailer says in a first-half trading update that total sales grew by 2.1% in the six months to October 30 2022 compared to the same time last year – or by 0.6% on a like-for-like (LFL) basis that strips out the effect of store openings and closures. Store sales were up by 3.5% LFL while online sales fell by 16.9% – but remained 50% higher than before Covid-19.
Sales during the first half of the year were hit by a cyber security incident in March, which temporarily closed a small number of stores and disrupted online deliveries, and continued to have an impact on sales Into May. But The Works says store LFL sales improved from June onwards – and broke records during the back to school season. Store sales grew less strongly in the last six weeks. That’s partly, says The Works, because of the extra bank holiday – for the funeral of Queen Elizabeth II – and partly because of strong performance in September and October 2021, when it believes that shoppers bought early for Christmas.
Online sales, meanwhile, were weaker than last year as shoppers returned to more normal shopping patterns in the wake of Covid-19 trading restrictions. Since then they have “gradually improved,” says The Works. “Online sales growth continue to track behind stores, but we are encouraged that the rate of decline has slowed progressively as trading through this channel stabilises and we continue to believe that there remains a significant opportunity for growth in this channel in the medium term,” it says in today’s statement.
Looking ahead, the retailer is cautious in the light of rising inflation and interest rates over the Christmas season, but says its value-led business is “more relevant than ever”. Its full-year expectations are unchanged. The market consensus for The Works’ adjusted earnings before interest, tax and one-off costs (EBITDA) is about £9m.
The Works chief executive Gavin Peck says: “We have delivered a resilient performance in the first half with positive sales growth overall, demonstrating continued progress against our “better, not just bigger” strategy. Our more customer-focused product proposition has continued to resonate, supported by the hard work and fantastic customer service delivered by our colleagues, helping to offset the challenging trading conditions being seen across the market.
“Although it is very difficult to predict what Christmas will look like this year, we believe that the great products and fantastic value we offer will be more important than ever, with families still looking to celebrate Christmas but in a more affordable way. The Works has proven itself to be a resilient business and we remain confident in our ability to make progress on our strategy and deliver growth in the medium term, supported by a robust balance sheet.”
At the end of the half-year, The Works had net cash of £11m. The Works is ranked Top100 in RXUK Top500 research.