The Works has dropped its profit guidance by £4m as it warned on challenging and uncertain market conditions, citing high inflation and low consumer confidence.
In the first half of FY24, the value retailer delivered total sales growth of 3.4% as a total like-for-like sales rose 1.6%.
Store like-for-like sales also increased by 3.5%, but online sales slipped 12.2%.
The business anticipates that trading conditions during the second half of the year” will remain challenging and consumer spend will be subdued”, resulting in the continuation of the increased levels of discounting recently seen across the sector.
To ensure that it offers the best value to it customers, The Works expects to maintain a higher level of promotional activity than envisaged at the outset of the year, as well as taking action to reduce costs.
It has changed its prediction for the full-year earnings in 2024. Now anticipating the pre-IFRS 16 Adjusted EBITDA to be around £6m instead of £10m.
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Chief executive Gavin Peck said: “The first half of the year has been challenging for the retail sector as cost-of-living pressures continued to weigh on households. We have focused on delivering excellent value for our customers, adapting as best we can to the tough trading conditions, and I am proud of the way our colleagues have rallied together and responded.
“Consumer sentiment softened towards the end of the period, which resulted in early discounting across the sector and increased uncertainty as we head into the Christmas period. Recognising the competitiveness of the market we have responded with more promotional activity, which we expect to continue as we approach Christmas. Families will want to celebrate Christmas affordably and our value proposition makes us an ideal choice for them.
“Market conditions remain challenging and given the level of uncertainty in trading and forecasting we believe it is now prudent to moderate our expectations for FY24. Despite this short-term volatility, we believe that our ‘better, not just bigger’ strategy has the potential to deliver profitable growth in the medium and long-term.”
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