TIDMSTU
RNS Number : 0643A
Studio Retail Group PLC
31 January 2022
31 January 2022
Studio Retail Group PLC
("SRG" or "Studio" or "the Company")
Trading Update
Improved performance on Black Friday and in Christmas period
although market-wide shipping issues add downward pressure to
profit
Higher stock levels going into Q4, combined with larger stock
commitments than usual, lead to need to increase working capital
requirements
SRG, the digital value retailer, today gives an update on its
trading during its peak Q3 trading period, being the 13 weeks to
24th December 2021, in addition to advising it is exploring a range
of options to meet a short-term working capital funding
requirement.
Trading Update
Trading improved as the quarter progressed, helped by greater
availability of stock in November and December when key shipments
were eventually undocked. Product sales in the eight weeks prior to
the Interim Results announcement on 25th November 2021 were down
21% against the prior year. However, in the remaining five weeks of
the quarter, which included Black Friday, product sales were 9%
ahead of the prior year. This brings the performance for Q3 as a
whole to 10% below the exceptionally strong performance seen during
the second national lockdown period last year and, cumulatively for
the first 39 weeks, down by 5%.
The comparatives with last year are distorted due high street
lockdowns consequent to Covid-19. A more appropriate comparison is
against the performance two years ago. On this basis, Q3 product
sales were up 18%, bringing the total growth against FY20 for the
first 39 weeks of the year to +28%.
The total active customer base stands at 2.3m, which is down 2%
on last year and up by 23% on two years ago. This is bolstered by
the progress we have made on cash customers and our active credit
customer base is up over two years by 4% at 1.4m, which is a slight
decline on last year of 5%.
Outlook
The third national lockdown at the start of 2021 created
unusually active and favourable trading conditions for Studio in Q4
last year. We expect to revert to more normal trading conditions in
Q4 this year, assuming no further lockdown restrictions. 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.
We therefore plan to take a more cautious approach to growth in
the coming months to bolster our capabilities and resources for
later in 2022, and in line with the broader market, we are also
increasing selling prices in Q4 and into FY23 to offset some of the
inflationary cost increases.
Demand in the early weeks of January has been relatively
subdued, with some margin erosion as we cleared some seasonal stock
that could not be carried forward. This has been partially
mitigated through the bad debt performance, which was better than
expected particularly due to improvements in the recovery rates
achieved on defaulted debts. It is also likely that some of the
actions to improve short-term working capital discussed below will
further reduce margin in the remaining weeks of the year. We have
also incurred some further costs linked to the shipping delays and
port congestion. As a result, our current expectations for Adjusted
PBT(1) for the full year are now likely to be in a range of GBP28m
to GBP30m.
Working Capital Requirements
The industrywide (and acknowledged) supply-chain challenges in
calendar 2021 have not only caused higher shipping costs for
Studio, but have also led to late-arriving unsold stock of
continuity ranges, which will be sold throughout calendar 2022.
This has led to a higher level of inventory than normal at this
time of the year. This is further compounded by commitments to
current and future season stock needing to be made earlier than
normal due to ongoing nervousness in supply chains.
In January, we have identified that these higher levels of
good-quality stock, in a market where demand is anticipated to
soften, is at a level that creates a surplus stockholding position
whilst we sell through the ranges to our customers. We are
exploring a range of options to meet the resultant working capital
funding requirement, including discussing the current level of our
working capital facilities with our long-standing UK lenders.
Studio currently has a fully drawn revolving credit facility of
GBP50m and, with a 12-month EBITDA of c.GBP50m, is well within its
key gearing covenant of 1.75x.
In addition, we are considering other controllable actions to
increase short-term liquidity, alongside steps already taken to
manage the pace of some of our medium-term capital investments.
We anticipate that the disruption to supply chains will continue
throughout calendar 2022, and other inflationary pressures require
us to take a more stringent approach to operating costs in FY23 to
ensure we can continue to maintain great value products to our
customers, and further reduce working capital requirements.
Paul Kendrick, Group CEO, commented:
"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 2.3m. We will
continue to drive the long-term profitability and success of the
group."
This announcement contains inside information for the purposes
of article 7 of EU Regulation 596/2014 and Article 7 of Onshore
Regulation (EU) 596/2014 as it forms part of domestic law by virtue
of the EU Withdrawal Act. The person responsible for making this
announcement on behalf of Studio Retail Group is Stuart Caldwell,
Group CFO.
Enquiries
Studio Retail Group plc +44 161 303 3465
Paul Kendrick, Group CEO
Stuart Caldwell, Group CFO
Tulchan Communications +44 20 753 4200
Will Palfreyman
LEI number: 2138006V9ZT2KO6PZY81
Notes to Editors
Studio Retail is a market-leading digital value retailer
offering its UK customers a broad range of products and a flexible
repayment proposition. Around 2.3m customers are able to enjoy
clothing and footwear alongside home and electrical products, plus
more seasonal ranges, many of which can be personalised for free.
The medium-term ambition is to achieve over GBP1bn of revenue,
through the following three levers for growth: Value, Choice,
Payment.
1) Adjusted PBT means profit before tax from continuing
operations, adjusted for individually significant items and
mark-to-market movements on derivatives.
2) Current market expectations of Adjusted PBT of GBP35m (FY20:
GBP27.3m, FY21: GBP48.8m)
Forward looking statements
This document may contain forward looking statements. In
particular, but without limitation, nothing contained in this
document should be relied upon or construed as a promise or a
forecast, including any projection or management estimate, any
statements which contain the words "anticipate", "believe",
"intend", "estimate", "expect", "forecast" and words of a similar
meaning, reflect the management of the Company's current beliefs
and expectations and are subject to risks and uncertainties that
may cause actual results to differ materially. Given these risks
and uncertainties, prospective investors are cautioned not to place
undue reliance on such statements. Any forward-looking statements
speak only as at the date of this document, and except as required
by applicable law, Studio Retail Group plc undertakes no obligation
to update or revise publicly any forward-looking statements,
whether as a result of new information or otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTDZGFMMGNGZZZ
(END) Dow Jones Newswires
January 31, 2022 01:59 ET (06:59 GMT)
Findel (LSE:FDL)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025
Findel (LSE:FDL)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025
