High street retailer The Works has blamed the impact of inflation and the rise in the National Living Wage after reporting heavier losses than expected in its latest financial statement.
The discount store cited “tighter” family budgets when it announced a drop in online sales earlier today, as well as “tough cost headwinds” from inflation and increases to the minimum wage.
Shares for The Works plummeted after online sales dropped by 12.2 per cent in the half-year to October 29, compared to the same period the previous year.
Losses for the retailer doubled from £7.3million to £14.8million, according to today’s interim financial results.
The retailer is taking 'decisive action' after online sales dropped
THE WORKS
As such, the company has declared it will take “decisive action” when it comes to cost reduction and margin growth as part of wider turnaround.
Like-for-like sales were “lower than anticipated” with a 4.9 per cent decline reported over the 11 weeks ending January 14 across The Works’ 525 stores.
The arts, crafts and stationery company is taking “decisive action” on cost reduction and margin growth in order to turn around its performance.
In its statement, the arts and crafts retailer blamed this result on a “challenging consumer environment and subdued demand over the festive period”.
As of January 14, the high street retailer reported a cash position of £18.4million which is an improvement after Christmas with the expectation of being debt-free by the end of the financial year.
Gavin Peck, The Works’ chief executive, described the current market conditions as being “persistently challenging”.
He said: “It is clear that many families celebrated Christmas on tighter budgets this year and whilst we offered excellent value, we were not immune to this reduced spend.
“I am proud of the way that our colleagues have rallied together to deliver for customers during these challenging times.”
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According to Mr Peck, the retailer is “mindful” of potential supply chain disruptions by the ongoing conflict in the Red Sea caused by Houthi rebel attacks.
The chief executive added: “Our focus for the remainder of the year will be on cost reduction, rebuilding margin and profitability and conserving cash.
“It is necessary to take this action now to stabilise the profitability of the business during this challenging period, however, we remain confident that our “better, not just bigger” strategy is the right direction for the business and will enable a return to sustainable growth in the long term.”
The Consumer Price Index (CPI) rate of inflation for the 12 months to December 2023 rose to four per cent after showing signs of easing in recent months.
Last year, the Government raised the National Living Wage to £10.42 an hour. It was confirmed workers would receive a nearly 10 per cent rate boost to £11.44 an hour.