The Works sees 2.5% like for like sales decrease and warns of 'uncertainty' over Christmas trading

The Works saw a 2.5% decrease in like for like sales in the first quarter of this year, warning of “uncertainty” over Christmas trading due to “low consumer confidence and rising inflation”. 

In a trading update for the 13 weeks to 31st July, the retailer reported “resilient” store sales, with like-for-like sales up 1.4%. Online like-for-like sales declined by 28.6% but remain 40% higher than pre-Covid levels. The retailer said this resulted in a total like-for-like sales decline of 2.5%, with total sales in the first quarter 1.3% lower than the year before.  

The Works was subject to a cyber security incident at the end of March this year, and said although the impact on trading was “limited” the action taken to secure the business “had a residual impact on store and online trading”.  

The retailer said store like-for-like sales growth was also impacted by a strong comparative with May 2021 and store performance “improved progressively through the period” with July’s store like-for-like sales up 7.6%. This was driven by an expansion of its front list adult book offering, enhancements to its children’s book offer and refreshed outdoor play range, as well as investment in its biggest ever "Back to School" offer.  

Online was impacted by trends affecting the industry, including channel shifting as post-Covid shopping trends normalise, and the “challenging” consumer environment, which it said appears to be affecting online sales more than physical stores.  

The report said: “Although the external environment will make it more challenging in the short term, our online penetration is only 10% of total sales and therefore provides a significant opportunity for growth in the medium term. We have made good progress against our ’better, not just bigger’ strategy. We are encouraged by the positive impact that this has had on the resilience of the business and that the ongoing improvements we are making to our proposition are resonating well with customers." 

However, the report warned that the general market outlook has “deteriorated” since the beginning of the year due to low consumer confidence and rising inflation. It said: “It is not clear how long these market conditions will persist, which creates a heightened degree of uncertainty about how consumers will behave, particularly in the forthcoming Christmas shopping season, The Works’ most important trading period.  

“While we still expect to be able to grow sales in the remainder of FY23, it is uncertain whether the level of growth will be in line with original expectations and that which is required to offset cost headwinds such as historically high freight costs, which are showing little sign of abating in the short term, as well as increases to the National Living Wage. In light of this uncertainty, and reflecting its desire to maintain a more cautious approach in these market conditions, the board has materially lowered its expectations in relation to FY23’s result.”  

Gavin Peck, c.e.o., said: “We delivered a strong performance in FY22 and will report a better than expected profit, as well as reinstating the payment of a dividend. Since the start of the financial year we have faced the residual effects of the cyber security incident and increasingly challenging trading conditions. The progressive recovery of store trading throughout the period is reassuring and we are pleased with the resilient performance delivered considering the lower consumer confidence. Our recent online sales performance reflects the challenges facing the broader sector but remains significantly higher than pre-Covid levels and we remain confident that the long-term investment we have made in our customer proposition will see further growth. 

“The Works is a remarkably resilient business and the group’s financial position remains robust. Although the near term market conditions are very uncertain, we are confident that our ‘better, not just bigger’ strategy still has a lot more upside to deliver in the medium term. As a value retailer we are working hard to ensure that customers can continue to rely on The Works as a destination for good value products, as well as focusing on protecting our profitability as the cost of doing business continues to rise.”