Shares in The Works (WRKS) rallied 11.5% to 63p as the budget books-to-toys retailer reported better than expected results for the first half to October 2021 and said it had generated record Christmas sales.
Assuming there are no further lockdowns, the cut-price arts and crafts seller now sees full year adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) coming in at around £15 million, ahead of its previous expectation.
Total sales increased by 30.6% to £116.1 million in the first half versus the prior year period, which was blighted by Covid-related temporary store closures.
Encouragingly, sales were 17.9% ahead of pre-pandemic levels, helping the retailer to narrow losses from £4.3 million to £1 million.
During the half, The Works generated better than expected two-year like-for-like sales growth of 14.5% as it became the go-to choice for parents looking to entertain the kids during a summer of staycations and capitalised on the ‘Fidget Frenzy’ trend.
CHRISTMAS CHEER
Sales in the 11 weeks to 16 January 2022 remained strong, with two-year like-for-like growth of 9% boosted by a record Christmas, including buoyant online sales as the retailer benefited from strong growth in adult books sales as well as branded products for children.
On the same day the latest ONS data showed a 3.7% month-on-month fall in retail sales for December driven by Omicron’s spread, The Works said its sales in the week before Christmas were ‘less affected than we expected’ by concerns over the latest Covid strain.
Proactive supply chain management ensured that ‘we had adequate stock despite some of it arriving later than planned’, the firm added.
Chief executive Gavin Peck said: ‘Our performance in the first half shows that our improved customer proposition, clarified purpose and the successful execution of our strategy are delivering tangible results.
‘We delivered a record Christmas, demonstrating the increasing appeal of our customer offer and despite uncertainty over the impact of Omicron and the ongoing supply chain challenges faced throughout our sector.’
Peck is confident The Works will deliver ‘an improved performance in full year 2022. We are now a much stronger business than we were two years ago and believe that delivering on our refocused strategy will have a transformational effect on our business.’
While his charge faces headwinds including ongoing supply chain issues, inflationary pressures and uncertainty over future Covid restrictions, Peck insisted ‘we begin the new calendar year in a strong financial position and remain confident that we are well placed to make progress on the many attractive opportunities that lie ahead’.
The Works is also bringing forward its review regarding the reinstatement of the dividend, ‘with a view to recommending a final dividend in respect of full year 2022, provided the preliminary results to be published in late July 2022 are in line with our revised expectations’.
