‘Nightmare before Christmas’ for The Works despite new London openings
Discount retailer, The Works, is expanding its presence in London and opening two new stores in Richmond and Wandsworth this month, even as the firm faces what the CEO calls “softened’ consumer appetite and “increased uncertainty across the economy.”
The openings will bring The Works’ total number of stores in Greater London to 13, with 527 stores in the UK and Ireland overall.
Set up in 1981, The Works debuted on London’s markets in 2018 at a valuation of £100m but its value has dropped rapidly since then.
Markets were unimpressed by the firm’s half-year results today – which showed overall sales up 3.4 per cent on last year but a 12.2 per cent decline in online sales – and shares sank a further 25 per cent to below 30p, some way short of the 160p offer price five years ago.
This news follows activist investor Kelso snapping up a stake in the arts and crafts retailer in September 2023, saying it will look to “restore the intrinsic valuation of the firm” after the share price slump.
CEO Gavin Peck said he believed that Christmas demand would peak later than usual, mirroring a similar pattern last year.
“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,” he said this morning.
“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.”
Discounting has begun earlier than usual, Peck said.
Commenting on the retailer’s financial results, UK investment platform AJ Bell said: “It’s the Nightmare before Christmas for The Works. The company was meant to be a champion in the cost-of-living crisis, selling cheap products to people who have been watching every penny.
“The idea of getting a big discount on a toy or book would appeal in such economic conditions. Sadly, its tills aren’t ringing as expected.
“The retailer blames the weather along with the ongoing tough environment for consumers, putting more pressure on the forthcoming festive shopping period to make up for the shortfall in expected earnings.”
A spokesperson for The Works told City PM: “In the short to medium term we will continue improving our existing store portfolio to realise its full potential through refits and relocations, as well as opening a select number of new stores in the best locations.
“We are continually enhancing our product ranges, as well as seeking to attract more customers to The Works by showing them the fantastic value we offer.
“We are focused on using customer data and insights to drive loyalty and with just over six weeks to go we are gearing up for Christmas.”