Half Year Trading Update
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the EU Market Abuse Regulation (596/2014). Upon the publication of the announcement via a regulatory information service, this information is considered to be in the public domain.
7 November 2019
("The Works" or the "Company")
Half Year Trading Update
TheWorks.co.uk plc, the multi-channel value retailer of gifts, arts, crafts, toys, books and stationery, announces today a trading update covering the 26-week period to 27 October 2019 (the "Period").
Total revenue increased by 5.4% year-on-year, and when excluding the impact of the prior year Mega Trend, LFL sales were -1.9%. This performance reflected the difficult consumer backdrop over the Period. When including the prior year Mega Trend LFL sales were -3.6%.
Against the challenging consumer backdrop, the Company undertook increased promotional activity during the Period and also increased its focus on costs. This included driving increased efficiencies through its retail distribution centre, delivering further property cost savings and carefully managing discretionary costs.
The Works heads into its peak trading period with confidence in its Christmas offering, which includes an extensive range of new products, such as Frozen 2 merchandise, available at outstanding value. A number of other propositional improvements undertaken in the first half and softening comparators are expected to support LFL improvement in the second half of the year.
As previously highlighted, the current high street environment creates opportunities, with the structural shift in the retail sector resulting in a strong pipeline of affordable, good quality retail space. Amid this context, the Company's successful store roll out strategy is progressing well, with a net 28 store openings in the first half of the year. The Company remains on track to deliver a net 50 new store openings for the full year. The new store openings continue to deliver a strong payback performance of around a year.
Whilst LFL sales have improved over recent weeks, as the impact of the prior year's Mega Trend eases, they were not at a level previously expected. Accordingly, the Company 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.
Kevin Keaney, Chief Executive Officer of The Works, commented:
"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."
Results for the first half of 2020 and an update on Christmas trading will be announced on 16 January 2020.
Kevin Keaney, CEO
Gavin Peck, CFO
Ben Foster, Haya Herbert-Burns, Rachel Miller
+44 20 7420 3190
Notes to Editors:
TheWorks.co.uk plc is a multi-channel value retailer of gifts, arts, crafts, toys, books and stationery - offering customers a differentiated proposition as a value alternative to full price specialist retailers. The Works sells its quality products at affordable prices across four product zones comprising Kids; Arts, Craft & Hobbies; Stationery; and Family Gifts, which are supplemented by both seasonal and regional offerings.
As at 27 October 2019, the Group operated a network of 525 stores in the UK and Ireland. Stores can be found on high streets, in retail parks, shopping centres, factory outlets and as concessions in various locations. The Works also has a significant online presence that enables customers to shop any time of the day, with an extended range of products not available in stores. This multi-channel offering is one of the first of its kind in the value retail sector and includes a popular Click & Collect service, driving additional footfall and sales in store.
 Mega Trends are defined as any individual product, or collection of products, for which sales exceed 3 per cent. of weekly sales for a temporary period and for which management deem to be material in terms of impacting on the underlying performance of the Company. For the comparable period, namely half year 2018, 'Squishies' were a Mega Trend.
 LFL sales are defined as the year-on-year growth in gross sales from stores which have been opened for a full 63 weeks (but excluding sales from stores closed for all or part of the relevant period or prior year comparable period), and from its e-Commerce platform, calculated on a calendar week basis.
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