Shares in the cut-price crafts, books and toys retailer The Works surged more than 40% on Friday after it reported strong trading heading into the critical Christmas retail sales season.
The company, which makes almost all of its annual profits in the festive period, said it was continuing to see a more “positive pattern” of sales after issuing a profit and sales warning in August. The retailer said total like-for-like sales increased 5.7% in the seven weeks to 18 September.
The Works makes the majority of revenues through its 525 physical stores, where sales were up 7.9%, but said it was building its presence online, where sales continued to show “gradual improvement”.
Although online sales were 40% higher than they were before the pandemic, they were down 10% on last year, when they peaked thanks to shoppers being forced online by lockdowns and Covid restrictions.
Gavin Peck, the chief executive of The Works, said: “We are well-placed operationally for Christmas and are gearing up to deliver for our customers, maintaining our commitment to provide them with the products they love at fantastic value. We are encouraged by the strength of recent trading which reinforces our confidence in the resilience of the business.”
The company said it had benefited from strong sales of its new back to school range, and enjoyed significant growth in books by pushing popular authors including Julia Donaldson and Richard Osman.
The Works reported a pre-tax profit of £10.2m in the year to 1 May, compared with a £2.8m loss in the previous 12 months, with revenues up 46.5% year-on-year to £264.6m.
The strong annual performance, which included profits above pre-Covid levels, and confident current trading led the retailer to reinstate its dividend, with a final payment of 2.4pa share.
Responding to the trading figures, Russ Mould, an investment director at the stockbroker AJ Bell, said: “The important thing to consider is that consumers are not going to stop spending altogether. They’re going to be more selective with their purchases, and that means potentially choosing lower-priced retailers.
“Value proposition is resonating with cash-strapped consumers who are watching their pennies but still want to buy things like birthday presents and the odd affordable treat.”
In August, The Works lowered sales and profit guidance for its current financial year amid concerns over shoppers’ changing habits in the face of the cost of living crisis. It expects to make profits of £9m in line with market consensus.
“The Works is a resilient business with a proven track record of delivering robust results during times of economic hardship,” said Peck. “However, given current conditions, we maintain our cautious view of the year ahead. We remain confident in our ability to continue making good strategic progress and to deliver growth in the medium-term.”