Studio Retail profits fall but it reports Black Friday bonanza
Studio Retail Group is going through lot of change, renaming itself from Findel and selling its education division to focus on its Studio retailing ops. But it seems to think the change is working. On Monday it reported “clear strategic progress in becoming a digital-first value retailer [plus] record sales from Studio in [the] peak Black Friday and Christmas period”.
But it wasn’t all good news as its first-half results, for the 26 weeks to September 27, showed total group revenue that was flat at £228.1m and revenue from continuing operations up only 0.3% to £181.3m.
Adjusted pre-tax profit may have risen 12% to £13m, but from its continuing operations, it was down 83% to £2.6m. Like many banks and retailers offering credit, it also previously sold payment protection insurance (PPI) and so has been caught up in the PPI mis-selling scandal. Claims against mis-sold PPI were what caused the pre-tax profit figure to drop.
But the studio.co.uk and Ace owner is upbeat and believes its new focus on its retail ops is the right thing to do. It has now reached a conditional agreement to sell its education operation for a headline cash consideration of £50m and has promoted its Studio MD Paul Kendrick to the board.
Looking at the half’s results in more detail, the company said that in H1, while total revenue for Studio was flat, online product sales for the main Studio brand were up 12.8%.
And Studio product gross profit was up 2.5%, with the margin percentage up 160bp through “improved buying practices, stock control and control over discounting”.
It also said financial services revenue was up 5.9% and gross profit up 9.4% “through a combination of credit receivables balance growth and improved arrears”.
Product sales from online channels in the Studio brand increased strongly in H1, up by 12.8%, with average spend per customer — particularly from the app channel — up by 3.1%.
And the “successful deployment of the Studio app with over 200,000 downloads to date,” meant online sales in H1 represented 81% of total sales, up from 72% at September 2018, with over 97% of new customers using one or more of its digital channels.
The company said it saw more customers “waiting for Black Friday and Christmas than in previous years,” but on the upside, “when they arrived post period-end, they did so in record numbers. Record levels of online sessions in a single day (781k on Black Friday), daily dispatches exceeding 100k parcels for the first time ever, and product sales in the last 11 weeks up 10% on prior year underlines Studio's digital growth trajectory”.
“Given the strong progress seen during the early weeks of the peak trading period, with Q3 product sales up 10%, we remain confident in the medium-term prospects for growth in this area,” it added.
Group CEO Phil Maudsley said: “We know that Studio's customers look for value all year round, so we do not need to chase promotional trends to maintain our market position. In support of this approach, we look forward to further initiatives coming on stream next year to enhance our digital-led value offer.
“The retail marketplace is undoubtedly challenging, but Studio's unique position as a digital-first, value-focused retailer with an integrated credit option gives us great confidence for the future."
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