Studio gives Q3 update as it explores options to meet working capital funding requirement
Online value retailer Studio has said it improved its performance on Black Friday and throughout the Christmas trading period, although market-wide shipping issues impacted profit.
Product sales in the eight weeks prior to 25 November were down 21% against the previous year, but in the remaining five weeks of its third quarter, they were 9% ahead as key shipments were eventually undocked. This meant that sales ended up 10% below the exceptionally strong performance seen during the second national lockdown period last year.
However, comparing sales to pre-pandemic levels two years ago, Studio said third quarter product sales were up 18% to bring total growth for the first 39 weeks of the financial year to +28%.
Paul Kendrick, Studio Group chief executive, said: “The fundamentals of Studio’s business model are solid, notwithstanding the market challenges that have been exacerbated by our over-commitment to stock in the near term. The trading performance over Christmas, with sales up 18% over two years, shows our offer is resonating with a customer base of 2.3 million. We will continue to drive the long-term profitability and success of the group.”
Giving an update on its fourth quarter, the retailer said it expects to revert to more normal trading conditions this year, assuming no further Covid-19 lockdown restrictions are introduced. It added: “This is also a period where consumers traditionally spend less on discretionary retail, and this is likely to be compounded due to the higher living costs, notably fuel and energy price increases.”
It is therefore planning to take a more cautious approach to growth in the coming months and is also increasing selling prices to offset inflationary cost rises. The retailer said demand in the early weeks of January has been relatively subdued, with some margin erosion as it cleared some seasonal stock that could not be carried forward.
Studio is now expecting adjusted pre-tax profit for the full year to be in a range of £28 million to £30 million.
The retailer has also announced that it is exploring a range of options to meet a working capital funding requirement, including discussing its current level of working capital facilities with its long-standing UK lenders.