Following today’s release of The Works’ figures for the 26 weeks ending 29th October 2023 & the 11 weeks ending 14 January 2024; Jamel Boughedda, retail analyst at GlobalData, a leading data and analytics company, offers his view: “A challenging economic backdrop and pressure on its core customers’ finances over Christmas, as spend was prioritised on food and essentials and away from gifting, caused a 4.9% like-for-like (l-f-l) decline in sales over the festive period for The Works. However, the retailer’s poor execution in its strategy was also a factor in its decline, with demand for its discount non-essential items waning. This weak Christmas performance is concerning given that competitor Card Factory reported l-f-l store trading up 7.8% for November and December, with its value and extensive ranges resonating with shoppers. Additionally, Waterstones stated that “sales were strong across the board” over the Christmas period, suggesting that The Works has been unable to capitalise on consumers willing to spend on books, boosted by the BookTok trend that has taken hold among young consumers.
“This disappointing Christmas performance followed a more stable H1 FY2023/24, with total revenue growth of 3.1% and l-f-l sales growth of 1.6%. However, ongoing supply chain disruptions, the cost headwinds of inflation and rises in the national living and minimum wages led to its gross margin declining and a pre-IFRS 16 adjusted EBITDA loss of £8.5m. This compares to a loss of £6.4m in H1 FY2022/23. These troubles are unlikely to go away, with recent supply chain disruption in the Red Sea likely to persist and external challenges such as inflation continuing. The Works is taking measures to reduce its losses for the remainder of the year, focusing on cost reduction and rebuilding margins and profitability.
“The Works is optimising its store estate, with the opening of 5 new stores in H1 and 19 refits driving store sales growth of 3.5% in the period, despite much of its strong performance offline being delivered in early summer. The retailer has also reduced the rents on its less profitable stores and reviewed how to make its distribution centre more efficient, though these measures will not bear fruit immediately. Improvements to its online proposition will support its topline, as this channel fell 12.2% in H1, with improvements to its usability and added promotional activities hoping to drive demand. Given the retailer recently commented on a slowdown in footfall across the sector, these measures could help counterbalance this decline. Its recovery will, however, rely on improving demand as external pressures persist. New ranges in the spring which the retailer is optimistic about will help, despite some of its new ranges over Christmas underperforming.”
