- Discount books and toys retailer reinstates the dividend
- Reports 10.4% growth in two year like-for-like sales
- Warns trading conditions remain ‘challenging’ due to cost of living squeeze
On the day the Office for National Statistics reported a surprise upturn in UK retail sales in April, budget books-to-toys retailer The Works (WRKS) reinstated the dividend and reiterated annual earnings guidance, drawing confidence from a robust sales performance.
Shares in the cut-price arts and crafts retailer seller skipped ahead by 13.8% to 57.2p on the welcome news, though The Works also warned of uncertainty over levels of consumer spending in the coming months.
For the year to 1 May 2022, The Works reported a 10.4% increase in two-year like-for-like sales, boosted by another record Christmas, with positive growth continuing online and in brick and mortar stores.
Since updating the stock market in January, The Works’ sales have been boosted by the emergence of the ‘BookTok’ trend, which has enabled the Birmingham-headquartered retailer to prompt renewed customer interest in previously best-selling books.
‘Branded toys and games have also continued to perform strongly,’ assured The Works, ‘through reinforcements to our ranges of, for example, Peppa Pig, Paw Patrol and Cocomelon.’
Amidst the backdrop of a worsening cost of living crisis, The Works conceded the wider consumer spending slowdown has impacted sales in recent months.
Yet thanks to operational and product range improvements made throughout the year, the retailer stuck with its £15 million full year 2022 earnings before interest, taxation, depreciation and amortisation (EBITDA) forecast.
Flush with £16.3 million of net cash in the coffers at year-end, The Works also reinstated the dividend following a Covid-19 hiatus. It expects to recommend a final dividend of around 2.4p alongside its full year results and maintain a progressive dividend policy thereafter.
CEO Gavin Peck said ‘the resilience that our business has shown against a challenging external backdrop, demonstrates the positive effect of our “better, not just bigger” strategy, which still has a lot more upside to deliver. We are delighted that our improved trading performance will enable us to recommend reinstating the dividend and remain optimistic that we can deliver further sales growth in the year ahead.’
However, Peck also warned that heading into the new financial year, ‘general trading conditions remain challenging. We will continue to focus on the factors within our control and ensure that, as customers face increasing cost-of-living pressures, they can continue to rely on The Works as a destination for great value products to inspire reading, learning, creativity and play.’
The Works was targeted by a cyber security attack last month which had a ‘limited impact on trading’, but given the extra time needed to implement IT security improvements, its full year results date has been delayed to September 2022.