Amidst a challenging economic landscape, high street retailer The Works has reported a significant downturn in profits for 2024.
The company encountered substantial obstacles, including cost pressures and diminished consumer demand, particularly during the crucial Christmas trading period.
Financial Performance and Challenges
The Works experienced a significant decline in profits for the financial year 2024, with adjusted earnings before interest, tax, depreciation, and amortisation dropping by 30% to £6 million from £9 million in the previous year. Additionally, the retailer’s adjusted profit before tax fell by 39% to £3.2 million, down from £5.3 million in 2023.
Despite the revenue challenges, the company managed to achieve a modest total revenue increase of 0.9%, amounting to £282.6 million for the year. This revenue growth was achieved under a backdrop of substantial cost pressures and weakened consumer demand, particularly during the pre-Christmas trading period.
Sales Distribution and Performance
Store sales, which constitute approximately 90% of the total revenue, demonstrated a 0.6% like-for-like increase, driving growth in an otherwise tough market environment. However, this was contrasted by a significant decline in online sales, which fell by 12.4% on a like-for-like basis.
Despite these operational efforts, the overall sales performance remained below initial projections, reflecting the continued difficulty in the broader retail sector. The company cited a “tough trading environment and operational challenges in the run up to Christmas” as key factors impacting sales.
Cost-Saving Measures and Strategic Adjustments
In response to the economic challenges and pressure on profitability, The Works implemented several cost-saving initiatives. These efforts were complemented by an improved trading performance in the final quarter of the year, enabling the company to meet its annual financial expectations.
According to the CEO, Gavin Peck, significant strategic progress was made throughout the year. He stated that the firm is now focusing on refining its business plans to enhance performance and deliver better shareholder returns in the future.
Looking forward, The Works is optimistic about its operational readiness and strategic positioning as it heads into the peak Christmas trading period, a critical time for retail sales.
Current Market Conditions and Future Outlook
Gavin Peck, in his comments on the current market conditions, acknowledged the persistently challenging consumer environment and the tough cost headwinds faced by the company. He expressed confidence in the measures taken to address these issues and the potential for profit growth in 2025.
The company noted that the sales performance for the first 21 weeks of the 2025 financial year was on target, with a slight like-for-like sales increase of 0.2%. This incremental improvement is seen as a positive sign as the company prepares for the crucial holiday season.
Management’s Strategic Vision
The company’s strategic vision involves a continued emphasis on cost efficiency and operational improvements. Peck highlighted that The Works is in a much stronger position operationally compared to previous years, which should support the company’s performance in the upcoming Christmas period.
The company has set a target to achieve EBITDA margins of five per cent, reflecting its commitment to improving profitability through strategic and operational initiatives. This target aligns with their broader goal of enhancing shareholder value and achieving sustainable growth.
Operational Readiness for Peak Season
As the peak trading period approaches, The Works feels well-prepared to manage and optimise its operations. This readiness positions the company favourably to support customers during the holiday season and potentially improve sales performance.
Peck concluded that The Works aims to deliver a successful holiday season for its customers, indicating a focus on customer experience and satisfaction during this pivotal time for retail businesses.
In summary, The Works faces considerable challenges due to reduced consumer demand and increased costs. However, the company’s cost-saving measures and strategic adjustments have positioned it to meet its financial expectations for the year.
Moving forward, The Works remains cautiously optimistic, with early signs of improvement in sales performance, strategic initiatives aimed at enhancing operational efficiency, and strong preparation for the peak Christmas trading period.