The Works has delivered a sharp rise in underlying profits as stronger sales, improved margins and cost savings helped offset higher wage and tax costs.
The arts, crafts and stationery retailer’s pre-IFRS 16 adjusted EBITDA surged 47 per cent to £14m in the year to 3 May, up from £9.5m the previous year.
Revenue climbed 3.1 per cent to £260m, while like-for-like sales rose 3.3 per cent, outperforming the 0.1 per cent decline reported across the wider UK non-food retail market.
Adjusted pre-tax profit increased 44 per cent to £7.2m as The Works benefited from a 240-basis-point improvement in product margin and delivered its targeted £2m of annual cost savings.
The Works said supplier negotiations, tighter stock controls, improved promotional markdowns and a more favourable product mix helped bolster margins.
However, statutory pre-tax profit from continuing operations fell 28 per cent to £6.8m, reflecting higher adjusting charges and the absence of impairment reversals booked in the previous year.
Total group profit after tax plunged 83 per cent to £1.4m following the impact of discontinued operations, which included The Works’ decision to stop selling through its website and focus on its store estate.
The retailer ended the year with £3.6m in net cash, down from £4.1m, and has secured a new £20m revolving credit facility running until November 2029.
Store estate grows as online sales end
The Works opened a net five stores during the year, taking its estate to 508 locations.
The business has focused investment on its highest-turnover “platinum” shops, improving stock distribution and availability while using local demographic data to tailor ranges and make better use of store space.
It also launched a new customer experience programme and increased the volume of new products across its books, stationery, arts and crafts, and toys and games categories.
The retailer said demand was being supported by families seeking affordable alternatives to screen-based entertainment.
Sales accelerate into new financial year
Trading has strengthened further since the year end, with like-for-like sales jumping 8.8 per cent during the first 11 weeks of its new financial year to 19 July.
Sales increased across all product categories during the period, compared with growth of seven per cent across the same weeks last year.
The Works maintained its recently upgraded full-year guidance for pre-IFRS 16 adjusted EBITDA of £15m, although it cautioned that its key back-to-school and Christmas trading periods were still to come.
Chief executive Gavin Peck said: “FY26 was a pivotal year for The Works, with continued execution against our growth strategy and a step change in underlying profitability supported by increasing demand from families for affordable screen-free activities.
“We have made a strong start to the new financial year, with like-for-like sales up 8.8 per cent in the first 11 weeks, underpinning our confidence in delivering further sales and profit growth in the current year.”
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