12 November 2021
TheWorks.co.uk plc
("The Works", the "Company" or the "Group")
Half-year trading update for the 26 weeks ended 31 October 2021
TheWorks.co.uk plc, the multi-channel value retailer of arts, crafts, toys, books and stationery, today announces a trading update for the 26 weeks ended 31 October 2021 (the "Period" or "H1 FY22").
Highlights
| · | Trading during the Period has been stronger than expected, with a two-year LFL(1) sales increase of 14.5% and total two-year sales growth of 17.9%(2). |
| · | The trading result reflects the increasing appeal of The Works' proposition and the strong progress in implementing our strategy to make the business "better not just bigger". |
| · | Net cash(3) of £17.8m at the Period end, an increase of £17.0m during H1 FY22, positions the Group well, ahead of the peak trading period. |
| · | Through proactive management of the supply chain and, assuming that our strategies to secure the supply of stock continue to be successful, stock levels are expected to support Christmas sales. |
| · | The Board expects the full year result for FY22 to be in line with its original expectations, despite incurring higher freight costs. |
Trading update
Total sales(2) for the Period increased by 17.9% compared to H1 FY20 (i.e. compared to two years ago), exceeding the Board's expectations and demonstrating the increasing appeal of The Works' proposition. Two-year LFL sales increased by 14.5%, with positive growth both online and in stores. Online sales have continued to be approximately double those in the comparable FY20 period.
The refocused strategy outlined in July 2021 included de-emphasising new store openings in favour of profitable digital growth and driving improvements through the existing store estate. Good progress against these pillars has helped to deliver the strong performance in the Period, including: improving the range and merchandising of our core art, craft and stationery categories; enhancing the in-store shopping experience through better space management and making our stores easier to shop in; and continuing to improve product availability through better stock management, including improving our supply chain systems.
The business has also benefitted during the Period from favourable external factors. Consumer demand has been strong, perhaps due in part to many families taking 'staycations' in the U.K. and we believe the convenient locations of many of our stores helped us benefit from this. The Group also delivered a strong 'back to school' performance, and has been successful in capitalising on the recent "fidget frenzy" trend. There are also signs that customers are shopping early for Christmas and, whilst the impact of this on H1 FY22 was small, we hope it is a positive indicator that strong demand will continue into the peak Christmas trading period.
The Works opened three new stores, closed five and relocated four stores, trading from 526 stores at the end of H1 FY22 (4).
Financial position
The Group ended the Period in a strong financial position, with net cash(3) of £17.8m (H1 FY21: £11.3m), up from £0.8m at the end of FY21. This includes the effect of favourable timing differences of approximately £10.0m, which are expected to unwind during the second half of the financial year.
Outlook
The early indications of Christmas sales are positive. However, the business is being affected by the widely reported shortages of ocean freight and UK haulage capacity. To minimise the impact of this, we made a conscious decision earlier in the year to secure the supply chain, as a result of which, we expect to have the stock we need in order to achieve our sales plans, albeit having incurred significant additional costs.
Overall, taking into account the stronger than expected trading during H1 FY22 and the higher freight costs and, assuming that our strategies to ensure the availability of stock to customers in the lead up to Christmas continue to be successful, the Board anticipates that the full year result for FY22 will be in line with its original expectations.
Gavin Peck, Chief Executive Officer of The Works, commented:
"It's clear from these results that our products resonated extremely well with customers during the pandemic, helping them to read, learn, play and craft through lockdown. Our strong sales in recent months demonstrate that demand has been maintained and customers continue to value our offer. It's particularly pleasing to see that whilst our online sales continue to run at almost double their pre-pandemic levels, store sales are also growing.
"Looking ahead, we have a fantastic range of products for our customers this Christmas with initial demand for them already very strong. We are cautiously optimistic about prospects for our peak sales season and our ability to trade through the ongoing supply chain challenges faced by the majority of our sector.
"As we celebrate our 40th year, I am proud of the business that The Works has become and of our colleagues who work incredibly hard to delight our customers and support one another."
Interim results notification
The interim results for H1 FY22 and an update on Christmas trading will be announced on Friday, 21 January 2022.
| Enquiries:
TheWorks.co.uk plc Gavin Peck CEO Steve Alldridge CFO
|
via Sanctuary Counsel |
|
| Sanctuary Counsel Ben Ullmann Rachel Miller
|
+44 7944 868288 | +44 7918 606667 | |
|
| (1) | The like for like (LFL) sales increase has been calculated with reference to the FY20 comparative sales figures, or two-year LFL, because the extended periods of enforced store closures during FY21 prevent that period from forming the basis of meaningful comparisons. |
| (2) | "Total sales" referred to in this statement includes VAT and is stated prior to deducting the cost of loyalty points which are adjusted out of the sales figure in the calculation of statutory revenue. The 26 week comparison period in FY20 used for the LFL and total sales calculations uses a literal mapping of calendar weeks between H1 FY22 and the corresponding 26 weeks two years prior. Due to the inclusion of a 53rd week in the FY21 accounting period, the H1 FY20 statutory accounting period is one week offset from the 26 week period used in the LFL and total sales comparisons. A reconciliation between the figures included in this statement and the H1 FY22 statutory revenue will be included in the Group's Interim Report to be issued in January 2022. |
| (3) | Net cash at bank excluding finance leases and on a non-IFRS 16 basis. |
| (4) | In relation to one of the relocated stores, the corresponding closure of the old store that is being relocated had not taken place by the period end, hence the Group traded from 526 stores rather than the 525 that the gross figures would imply. |
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