The Works warns on earnings as discounting starts early
The business said it would have to put on more promotions to appeal to customers.
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Your support makes all the difference.Retailer The Works has warned it is likely to miss earnings expectations this year as it will need to ramp up discounts to compete in a tricky market.
The business said the amount that customers are spending has been “subdued” as households were hit by inflation.
In the last nine weeks “consumer demand has softened further” and footfall dropped because of poor weather, the firm said.
It said forecasts this early have “a high degree of uncertainty”, but that traditional conditions are likely to remain challenging.
The first half of the year has been challenging for the retail sector as cost-of-living pressures continued to weigh on households
Earnings before interest, tax, depreciation and amortisation (EBITDA) are now expected to be £6 million this year.
Market watchers expected the company to make £10 million in EBITDA.
Shares in the company were down by around a quarter on Thursday afternoon following the news.
“As always, trading in the six weeks between now and Christmas will have a significant bearing on the overall result for the financial year,” The Works said.
“Last year, consumers left Christmas shopping until very late in the season, and we expect that sales may follow a similar pattern this year. As such, any forecast prepared at this stage includes a high degree of uncertainty.”
The business said it was likely it would have to put on more promotions than it expected at the beginning of the year.
The firm also promised to try to cut costs.
It added: “Taking into account the level of uncertainty with regard to sales, and our expectation that it will be necessary to continue to maintain a higher than planned level of discounting to remain competitive, we have revised our estimate of the likely full-year result.”
Chief executive Gavin Peck said: “The first half of the year has been challenging for the retail sector as cost-of-living pressures continued to weigh on households.
“We have focused on delivering excellent value for our customers, adapting as best we can to the tough trading conditions, and I am proud of the way our colleagues have rallied together and responded.”