Shares in The Works rise sharply after strong sales and return to profit | Retail

Shares in low-cost craft, book and toy retailer The Works rose more than 40% Friday after it reported strong trading ahead of the critical Christmas selling season.

The company, which makes nearly all of its annual profits during the holiday season, said it continued to see a more positive sales pattern after issuing a profit and sales warning in August. The retailer said total like-for-like sales were up 5.7% in the seven weeks to September 18.

The Works gets the majority of its sales through its 525 brick and mortar stores, where sales grew 7.9%, but said it was building its presence online, where sales continued to “improve gradually.”

While online sales were 40% higher than before the pandemic, they were 10% lower than last year when they peaked thanks to shoppers being forced online by lockdowns and Covid restrictions.

Gavin Peck, the chief executive of The Works, said: “We are operationally well positioned for Christmas and gearing up to deliver for our customers, as we remain committed to bringing them the products they love at a great price. We are encouraged by the strength of recent trade, which bolsters our confidence in the company’s resilience.”

The company said it had benefited from strong sales of its new back to school range and experienced significant growth in books by boosting popular authors, including Julia Donaldson and Richard Osman.

The Works reported a pre-tax profit of £10.2 million for the year to 1 May, compared to a loss of £2.8 million in the previous 12 months, with sales up 46.5% year-on-year to £264, 6 million.

Strong annual performance, including gains above pre-Covid levels, and confident current trading led the retailer to restore its dividend, with a final payment of 2.4pa share.

Commenting on the trade figures, Russ Mold, an investment director at stockbroker AJ Bell, said: “The most important thing to consider is that consumers will not stop spending altogether. They will be more selective with their purchases, and that may mean choosing cheaper retailers.

“Value proposition resonates with cash-strapped consumers who are watching their money, but still want to buy things like birthday presents and the odd affordable treat.”

In August, The Works lowered its current fiscal year sales and earnings expectations amid concerns about changing shoppers’ habits in light of the cost of living. It expects to make a profit of £9 million in line with market consensus.

“The Works is a resilient company with a proven track record of delivering robust results in times of economic adversity,” said Peck. “However, given the current circumstances, we maintain our cautious view on the coming year. We remain confident in our ability to continue to make good strategic progress and achieve growth in the medium term.”

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