// The Works swings to £18m loss after “significant” coronavirus impact
// Adjusted pre-tax profit nose dived 65.2% to £2.4m, while EBTIDA dropped 22.3% to £10.8m
// Revenue grew 3.5% & like-for-likes increased 0.67%, but these were slower than the growth recorded in 2019
The Works has swung to a pre-tax loss on the back of a dramatic slowdown in full-year sales and like-for-likes amid the “significant impact” of the coronavirus pandemic.
The discount arts & crafts, books and stationery retailer booked a pre-tax loss of £18 million for its financial year ending April 26, compared to a £2.3 million profit the prior year.
The Works attributed the loss to non-cash impairment charges resulting from Covid-19 of £19.5 million, relating to goodwill and downgrades in the value of its stores.
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On an adjusted basis, The Work’s full-year pre-tax profit nose dived 65.2 per cent to £2.4 million.
Meanwhile full-year adjusted EBITDA dropped 22.3 per cent year-on-year to £10.8 million, albeit with the adverse trading impact of Covid-19 estimated to be approximately £3 million.
On the other hand, full year revenues grew 3.5 per cent year-on-year to £225 million – although this was a slowdown on the 13.2 per cent surge recorded in 2019.
Like-for-likes also grew 0.7 per cent, boosted by the ninth successive Christmas trading period, but this too was a slowdown on the three per cent uptick recorded last year.
Nonetheless, The Works said it enjoyed growth both online and in stores, despite the significant impact of Covid-19 in the latter weeks of the financial year.
Since the start of the current financial year, The Works has been further impacted by the pandemic, especially since all of its stores were shut during lockdown in the first seven weeks.
In the 17 weeks to August 23, the retailer said total sales were down 26 per cent, and performance since the phased reopening of its stores in mid-June has been “well ahead of the board’s expectations”.
In the 10 weeks since lockdown ended The Works said like-for-like sales increased by 0.7 per cent, and added that store like-for-likes are currently tracking at a high single digit decline with growth in average transaction value partially offsetting lower transaction volumes.
However, the retailer said its online performance remained strong with sales levels more than double last year’s in the same 10 week period.
Despite insisting on a “very positive performance” since the reopening of stores in mid-June 2020, given the continued uncertainty presented by Covid-19, The Works said it was “not yet possible to provide specific guidance” for the financial year ahead.
Despite this, the board would not be proposing payment of a final dividend for the full year period.
“Our performance this year demonstrates the resilience of our business and we are pleased to have delivered a creditable performance despite the challenging backdrop,” The Works chief executive Gavin Peck.
He added: “Christmas was a turning point and this positive momentum continued in the following months supported by new products and merchandising initiatives launched during the year driving like-for-like sales growth.
“The improved trading performance was supported by the increased focus on cost management.
“The closure of our entire store estate in March had a significant impact on our business, however we responded to the crisis with agility and were ready to bounce back once safe to do so.
“Our decisive action in response to the Covid-19 pandemic enabled us to protect colleagues and customers, meet the significant increase in online demand, and minimise the financial impact.
“We are encouraged by the trading performance since lockdown lifted and will continue to focus on improving our online capacity and customer experience in stores under social distancing as we head into peak Christmas trading.
“The current uncertainty means that we are unable to provide specific guidance. We will continue to monitor the situation closely and remain agile ahead of our key trading period.
“Our performance during the Covid-19 pandemic shows our customer proposition is more relevant than ever and, despite the significant uncertainty that remains, the board continues to believe that we have many exciting opportunities ahead of us that will enable us to deliver value for all of our stakeholders in the long-term.”
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