A retailer with shops in Tayside and Fife has warned it could run out of money and cease trading.
Hobby retailer The Works has five outlets across Dundee, Perth and Fife.
In a trading update, company bosses expressed concerns about the future.
The firm said there are scenarios where it would breach its agreements with lenders in the next financial year.
It said this “represents a material uncertainty that may cast significant doubt on the group’s and the company’s ability to continue as a going concern”.
Where are The Works shops in Tayside and Fife?
- Wellgate Shopping Centre in Dundee
- St John’s Shopping Centre in Perth
- Kingdom Centre, Glenrothes
- Kirkcaldy High Street
- Kingsgate Shopping Centre, Dunfermline
Revenue falls 25% in lockdown
The company, also known for its discounted books, reported in-person shopping restrictions over the last few months have seen revenue drop by nearly a quarter.
The 11 weeks since the company closed the first half of the financial year have brought increased Government measures to slow the spread of Covid-19.
Shops were shut for parts of the period and sales fell by 24.8%. This was despite a 70% jump in online sales compared to a year ago.
“Our interim results and trading over the crucial Christmas period reflect a robust performance given the impact of store closures as a result of Government restrictions,” said chief executive Gavin Peck.
“With our stores temporarily closed, we are, once again, focused on maximising sales through our online operations and carefully controlling costs whilst ensuring that we are able to reopen safely when restrictions allow.”
Beat the boredom offer
In the six months to the end of October, revenue dropped by 7.8% to £88.9 million, as the company’s shops were forced to close for seven weeks during the start of the period to slow the spread of Covid-19.
However, when the stores were not shut, they significantly exceeded what the board was expecting.
Like-for-like sales jumped by 10.6% over the 19 weeks ending October 25.
And despite the blow to revenues, The Works managed to nearly halve its pre-tax loss from £8.5 million in the first half of last financial year, to £4.3 million.
The company also saw the Covid-19 crisis as a marketing opportunity.
Art, crafts, jigsaws and books formed part of a “beat the boredom” offer, when shops were open.
However, overall the firm cut its marketing spend and reduced promotions in a bid to make online operations more profitable.
It also slashed costs by negotiating lower rents on some of its shops. It closed six outlets over the period, while only opening two new ones.
Ongoing commitment
“When open, our stores have performed well and our online proposition has continued to resonate strongly, supported by the investment we made to increase online capacity,” Mr Peck said.
“Our ability to continue to safely serve our customers and communities through these unsettling periods is thanks to the ongoing commitment and hard work of fantastic colleagues across the business, something I am incredibly proud of.”
