Shares in retailer TheWorks.co.uk PLC (LSE:WRKS) slid 8% to 24.9p after it revealed wider losses in the first half of fiscal 2024 against a backdrop of softened consumer demand.
The value retailer of craft and stationery products posted an underlying loss (LBITDA) of £8.5 million for the half year, widening its loss from £6.4 million a year earlier.
The Works reiterated its guidance for the full year, expecting to generate £6 million of adjusted underlying earnings (EBITDA), despite the first half's mounting losses.
Pre-tax losses hit £7.8 million during the 26 weeks to 29 October, up from £7.3 million a year before, as turnover rose 3.1% to £122.6 million with store sales up 1.6% but online sales down 12.2%.
During the peak trading period spanning 11 weeks to 14 January 2024, like-for-like sales fell by 4.9%, which the company said was “lower than anticipated” and the result of weak demand over the festive period.
Despite facing challenging market conditions, its product gross margin increased to 57.2%, up from 56.3% a year earlier, partly due to lower freight costs.
The group added that, due to pressure on profits from lower sales, it has “pivoted to focus on resetting” its cost base, growing gross margin and scaling back investments.
It opened five new stores during the period, carried out 19 refits, made three relocations and closed a further 10 stores.
Family finances were under pressure this Christmas, meaning many customers prioritised spend on food and essentials while cutting back on gifts.
This meant that many companies extended their discounts throughout November and December.
The Works said it faced additional cost headwinds due to inflation and the increase in minimum wages.
Chief executive Gavin Peck said: “We have started the new calendar year on an improved sales trajectory, with a strengthened leadership team to drive forward our strategy and exciting Easter and summer toy ranges due to land later this year. However, we are also mindful of external challenges, including recent supply chain disruption in the Red Sea.
"Our focus for the remainder of the year will be on cost reduction, rebuilding margin and profitability, and conserving cash."
The group had net bank borrowings of £2.5 million at the end of the trading period.