The Works warns on profits as like-for-like sales suffer

The value toy retailer recorded a 5.4% uplift in total revenue in the 26 weeks to October 27, but like-for-like sales were down 3.6% overall.

As a result of this, the retailer said it “is taking a more cautious view on trading ahead of the Christmas trading period and, as such, the board now expects full-year profit before tax to be significantly below current market expectations”.

The retailer attributes its decline in sales to tough comparables against a ‘mega-trend’ toy called Squishies which comprised nearly 3% of weekly sales for a period in the first half of 2018. Although the business said these comparatives have eased in recent weeks, like-for-like sales are still “not at the level previously expected”.

The Works has increased its promotional activity during the period in a bid to drive sales against “the challenging consumer backdrop” alongside “increased efficiencies through its retail distribution centre, delivering further property cost savings and carefully managing discretionary costs”.

The value retailer opened 28 new stores during the first half of its financial year and says it is on track to open a net 50 new branches by the end of the financial year. The retailer said its new stores deliver “a strong payback performance of around a year”.

Chief executive Kevin Keaney said: “The consumer environment has remained challenging and we have been trading against strong comparators given last year’s Mega Trend. We have responded decisively to minimise the impact to our performance and are benefiting from easier comparators in the second half.

“We now look ahead to the busy Christmas period fully prepared and ready to deliver for our customers with a fantastic selection of good quality and great value products. Notwithstanding the current backdrop, we remain confident in our medium-term growth opportunities and we continue to invest to unlock them.”