Discount retailer The Works ‘well positioned’ for bigger profits

Discount retailer The Works said it was “well positioned” to boost profits this year amid improving trading in recent months.

Despite restricted levels of consumer spending and non-food retail sales across the UK, the books and stationery seller reported that its like-for-like turnover rose 0.2 per cent in the 21 weeks to on September 29.

This follows a 0.9 percent drop over the 53 weeks ending May 5, caused by a 12.4 percent drop in online sales as the group raised shipping costs and threshold free shipping.

Total revenues still rose by £2.5m to £282.6m, but adjusted profits before the unpleasantness plunged by a third to £6m as sales were weaker than expected.

The Works said rising inflation and cost of living pressures led to higher discount volumes across the retail sector.

This particularly affected the company during the peak Christmas shopping season, when stock flows were also briefly disrupted by a shortage of space at a major distribution center.

However, the Warwickshire-based company said it was well prepared for the upcoming festive period, having resolved capacity issues at its warehouse.

It believes sales will benefit from “exciting new product ranges”, including book launches and its 2 for £12 gift offer.

Furthermore, the group believes that increased product margins and cost savings will help it achieve higher profits this financial year.

The Works closed 24 predominantly loss-making or low-profit stores last year after failing to reach better deals with landlords, leaving it with 511 outlets at the end of September.

Gavin Peck, chief executive of The Works, said that despite cost headwinds and lower consumer confidence, “the operational and cost actions we have taken and the trajectory of recent business operations mean we are well positioned to offset them and return to earnings growth in FY25.” .

“Operationally, we are in a much stronger position this year as we approach the next peak Christmas trading period and we look forward to helping customers have a Christmas well spent.”

The Works further announced that two non-executive directors, John Goold and Mark Kirkland, had resigned with immediate effect.

Goold and Kirkland are chief executive and chief financial officer, respectively, of Kelso Group Holdings, which owns a 6.15 per cent stake in The Works.

The pair said they joined temporarily “to provide additional guidance as the business went through a period of change”, including the transfer of its listing from the Main Market to AIM.

After the commercial update, TheWorks.co.uk shares They rose 4.2 per cent to 25p early on Tuesday afternoon, although they have fallen by more than a third since last November.