Studio Retail has set out its strategy as it targets annual sales of £1bn, after a record twelve months in which its pre-tax profits are expected to be at least 75% ahead of the previous year.
The retail group had previously put itself up for sale as it reviewed its future options at the behest of shareholders including Mike Ashley’s Frasers Group. The company did not find a buyer for the whole business, but it has now sold its educational resources business, Findel Education, for £30m to a company, West Moorland 221, managed by private equity business Endless LLP.
The deal leaves Studio Retail Group free to focus on building its core Studio Retail business into a leading online value retailer with its own financial services offer. It aims to do that through a strategy that includes extending its product range and building brand awareness to win customers looking for value and flexible credit payment options.
Paul Kendrick, Studio Retail Group chief executive, says: “Studio has seen strong trading during the financial year ending 26 March 2021 whilst successfully managing the operational challenges of the pandemic, which, along with the sale of Findel Education, creates a step‐change in our financial position. We start the new financial year from a position of focus and strength, with the growth in our customer base demonstrating the success of our leading online value retail and integrated financial services offer.
"I am hugely proud of all my Studio colleagues who have worked tirelessly throughout the year in order to deliver this trading performance. We will continue to support our colleagues to ensure their safety and wellbeing through these challenging times"
The retail group expects its pre-tax profits for continuing operations to come to between £48m and £50m in the year to March 26 2020. That would be between 75% and 83% ahead of the £27.3m it reported in pre-tax profits for the previous full year.
During the year the retailer saw its customer base grow by 36% to 2.5m, of whom more than 1.5m (+15%) have active credit accounts. In the fourth quarter of the year alone, more than a quarter of sales came via the Studio app – now downloaded by more than a million customers – while its retail sales were 88% ahead of the previous year. The retailer repaid any government support that it claimed and says support had no impact on its profitability. Credit collections were running well ahead of the previous year despite the Covid-19 pandemic.
Findel Education reported a pre-tax profit of £2m in the year to March 27 and has net assets of £17.2m. As part of the sale agreement to Endless, Studio is also lending Findel Education £2m in working capital, secured against its assets, until the end of September.
Kendrick adds: “Under SRG’s ownership, Findel Education has transformed itself from a catalogue retailer to an online first business and we are confident that it will continue on the next phase of its digital transformation under the ownership of Endless.”