The arts, crafts and stationery retailer The Works has announced a significant decline in annual profits due to sales and cost challenges, but the company is optimistic about a return to growth in the coming year.
In the financial year ending on May 5, The Works saw a 40% decrease in underlying pre-tax profits to £3.2 million, with like-for-like sales also falling by 0.9%. Despite these setbacks, the company stated that it is well-positioned to achieve earnings growth in the upcoming year.
The retailer reported a 23% drop in statutory pre-tax profits to £6.9 million, reflecting the tough market conditions it faced. However, there has been a notable improvement in trading performance in the last quarter, which has carried over into the new financial year. Comparable store sales have increased by 0.2% in the first 21 weeks, indicating a positive trend for the company.
CEO Gavin Peck expressed confidence in the company’s operational strength going into the crucial Christmas trading period. He highlighted the progress made in cost and operational actions, which are expected to support profit growth in the fiscal year 2024-25.
The Works also disclosed changes in its board, with non-executive directors John Goold and Mark Kirkland stepping down. The pair, who represent major shareholder US private equity firm Kelso Group, expressed their satisfaction with the company’s transformation and growth trajectory under the current management team.
As part of its cost-saving measures, The Works has been addressing inflation pressures by closing underperforming stores and renegotiating supplier agreements. The company has also adjusted staff working hours to manage rising wage costs due to increases in the National Living Wage.
Despite challenges posed by high shipping costs and subdued consumer confidence, The Works remains optimistic about its future profitability and growth prospects. Shares in the group surged by up to 11% following the positive outlook shared by the company’s leadership.