The Works expects return to profit amid cost-cutting plans

The Works is anticipating a return to profit in its new financial year, having reported flat sales for FY24, following its relisting to AIM and further cost-cutting measures.  

In its latest trading update for the year ended 5 May 2024, revenues inched up by 0.9% to £282.6m, while total like-for-like sales dipped by 0.9%.

It comes as the group transferred from its main listing on the London Stock Exchange to AIM, a move that saw it enter a “more flexible regulatory environment”, leading to a “significantly” lower audit fee. 

In its latest trading update, the group highlighted some other measures to stabilise its profitability, improve margins and reduce costs. 

This included moving its online fulfilment centre to a more efficient facility, ending its loyalty scheme to “focus instead on maintaining everyday affordable prices”, and improving margin prices through negotiations with suppliers and optimised promotional activity.

The group also made changes to its distribution centre and store labour model, which are expected to “drive significant efficiencies”, and negotiated rent savings with landlords, whilst also restructuring its operational board.

During FY24, the group also “improved the overall quality and profitability” of its store portfolio, with nine new store openings, 24 closures, five relocations and 21 store refits. It traded from 511 stores at the year end, of which over 96% were profitable. 

The group added that most of the benefits from these measures are expected in FY25, but it already started to deliver improved margins and lower costs in Q4 of FY24. 

Looking ahead, it expects FY25 to deliver stable sales, and is “confident” that its measures to reduce costs and improve margins will offset“significant” cost headwinds, including the National Living Wage, higher freight costs and business rates. 

In light of this it is planning to deliver improved earnings of around £8.5m in FY25.

Gavin Peck, CEO of The Works, said: “We are pleased to have finished FY24 in line with market expectations, which reflects action taken to reset our cost base and improve margins, supported by improving store sales in the final quarter. 

“Significant changes implemented across the business make us well-placed to offset cost headwinds and we expect to return to profit growth in FY25. In a year of considerable change at The Works I am incredibly grateful to our colleagues for their ongoing dedication to our business and to our customers.”