The Works shares dive as half-year losses climb more than tenfold
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Retailer The Works sees shares fall as half-year losses more than tenfold amid rising labor costs
- The Works said losses for the six months ended October 30 totaled £8.7m
- Margins were impacted by supply chain disruptions and sales of frontlist books
- Total revenue grew 2.4% while LFL online revenue declined 16.9%
Shares of The Works fell nearly a fifth early Friday morning after the discounter reported that its half-year losses rose more than tenfold despite an excellent trading performance.
Losses for the six months ended 30 October rose to £8.7m, from £852,000 for the same period in the previous year, as the group was hit by much higher wage costs and a lack of corporate rates.
Margins were further squeezed by higher container freight rates due to supply chain disruptions and much stronger sales of ‘frontlist’ books – new titles from authors such as Julia Donaldson and Colleen Hoover.
Results: Losses for the six months ended 30 October rose to £8.7m as The Works was hit by much higher wage costs and the lack of corporate rate cuts
Total sales remained resilient throughout the period, growing by 2.4 percent from a very positive comparative result in 2021, as UK high streets reaped the benefits of the easing of Covid-19 restrictions.
But due to consumers returning to stores faster than the company expected, like-for-like online revenues fell 16.9 percent.
Trade was also hurt by the tougher economic conditions hitting the UK economy and a cybersecurity incident last March that delayed some deliveries and led to the temporary closure of several sites.
TheWorks.co.uk shares was down 20.1 per cent to 34.5 pence by 11am after the release of interim results, making it the worst performer on the FTSE Fledgling Index.
Gavin Peck, CEO of the company, said: “We have not been immune to the economic headwinds hitting the retail sector, including higher costs that 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 take up our offering, which enabled us to deliver positive revenue growth overall.”
Since the end of October, The Works has found sales to remain robust, growing 5.7 percent in the 11 weeks ending January 15, even as digital sales took a huge dent from postal strikes at Royal Mail.
It noted that demand for shops was “particularly strong” in the week leading up to Christmas, indicating that Britons shopped much later than in the previous two years.
Products from the company that were popular with Christmas shoppers included the arts and crafts range, table games such as The LOGO Board Game and Elf Monopoly, and the ‘3 for £15’ offer.
Due to the seasonal nature of the business, The Works’ profitability is highly dependent on its performance during the festive peak period and the second half of the fiscal year.
It expects to record an improved trading result this year, but the group’s management has decided to maintain the current full-year forecast amid concerns that consumer spending could weaken in the coming months.
Friday’s announcement by The Works comes as figures from the Office for National Statistics estimate retail sales fell 1 percent in December amid rising inflationary pressures.