Studio Retail faces challenges but womenswear is bouncing back
Value-focused retail group Studio Retail has scaled back its full-year profit expectations after seeing a “solid” first half but “challenging trading conditions in Q3”.
The news came as it released results for the 26 weeks ended 24 September.
Its current expectation is for full-year adjusted pre-tax profit in a range of £35 million to £40 million, down from earlier expectations of £42 million to £45 million.
Studio typically delivers around 40% of its full-year product sales during Q3, the period that includes Black Friday and Christmas.
It said its core seasonal ranges “have sold well throughout peak and although sales of certain ranges, notably ladies clothing, have been slower than expected, they have recovered well in the last two weeks”.
The firm said its impression is that “customers are shopping more selectively this year given inflationary pressures and the recovery from the pandemic”.
Meanwhile, the supply chain challenges have added cost and gross margin pressure that have “only partially been mitigated through pricing”. And it has also recruited fewer new customers due to “marketing media inflation, lower availability hindering conversion, plus changes in [its] financial services strategy that have had more of a short-term impact than anticipated”.
It added that it has had to manage challenges in product shipping, which have driven up costs and "this will lead to selling price inflation going forward”.
The firm has faced “product availability issues” too, as deliveries were delayed, although it took “a proactive decision to secure stock early aided by our Shanghai-based sourcing office, meaning that as we went into peak season, we had higher levels of stock than last year and have good tracking in place on all remaining deliveries due in the next couple of weeks”.
And another issue has been the lower availability of staff to fulfil temporary roles in its operations. It has therefore had to put in place “peak season pay enhancements”, which should help it through the festive shopping season, but it’s also expecting to have to handle further wage increases next year.
So having dealt with the current and future outlook, what actually happened in the first half?
The company said that group revenue rose 3.2% year-on-year to £239.6 million. And adjusted profit before tax was up 36% at £23.7 million. Meanwhile reported profit before tax rose 67% to reach £26.5 million and the company’s core net debt fell from £45.2 million down to £20.8 million.
The group revenue figure was also up 32% compared to the same period in 2019 following the exceptional growth that it saw in the last financial year.
Product revenue at the company was up 0.3% year-on-year and 38% over two years. And the company said that it had more than 1.2 million active Studio App users with 25% of purchases now coming through this channel.
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