Shares in The Works (WRKS) cheapened 1.75% to 56p after the cut-price books, toys, arts and crafts retailer warned of higher freight costs.
This overshadowed news of stronger than expected trading in the half to October 2021, with the retailer also insisting it has secured the stock it needs to deliver against its Christmas sales targets.
The Works conceded it is being impacted by well-documented sea freight and UK haulage driver shortages, although the early indications of Christmas sales are said to be ‘positive’.
Earlier in the year, The Works made a conscious decision to ‘secure the supply chain’, as a result of which, it expects to have ‘the stock we need in order to achieve our sales plans, albeit having incurred significant additional costs’.
Despite having to absorb higher freight costs, the retailer anticipates full year results will be in line with its original expectations, supported by better than expected recent trading.
BETTER, NOT JUST BIGGER
In the first half to October 2021, The Works’ like-for-like sales were up 14.5% on the comparable pre-Covid period two years ago, before the lockdown-induced store closures, a performance that reflected positive growth online and in stores.
Total sales were 17.9% ahead of the period two years ago, exceeding management’s expectations thanks to the growing appeal of The Works’ customer proposition and strong progress in implementing its strategy to make the business “better not just bigger”.
This strategy involves de-emphasising new store openings in favour of profitable digital growth and driving improvements through the existing store estate.
The Works explained consumer demand has been strong, with many families taking ‘staycations’ in the UK. The retailer delivered a strong ‘back to school’ performance and also capitalised on the recent ‘fidget frenzy’ trend.
THE PECK REPORT
‘Our strong sales in recent months demonstrate that demand has been maintained and customers continue to value our offer,’ said CEO Gavin Peck.
He added: ‘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.’
