The Works faces another challenging chapter amid second wave of lockdown restrictions

GlobalData Retail 5 November 2020 (Last Updated November 5th, 2020 12:33)

The Works faces another challenging chapter amid second wave of lockdown restrictions

The Works has revealed its key weakness amid the pandemic; a heavy reliance on its 530 stores. Seven weeks of temporary store closures dragged down total sales (-7.1%) as the retailer struggled to shift spend online, despite high demand for categories such as books and crafts. However, a positive l-f-l performance since stores reopened (+10.6% for the 19 weeks to 25 October), combined with net cash of £8.4m, will support the business through upcoming headwinds.

With its value proposition, The Works is well-placed to benefit from consumers trading down amid financial uncertainty. But, unlike the previous lockdown, schools and universities remain open, and consumers can take unlimited amounts of exercise outdoors, which will have a negative impact on demand for crafts and games. The discount retailer will also not benefit from the release of a Hollywood film like it did in Christmas 2019, when it experienced a strong performance from Frozen 2 merchandise. To combat this, The Works must cast a stronger focus on products that improve mental health, such as adult colouring books, during the winter lockdown.

Though online sales growth at The Works remained strong as stores reopened (almost doubling in the 19-week period), this will have come from a small base. The discount retailer must invest in fulfilment to encourage online purchases, as delivery for orders under £30 costs £2.99, and orders arrive within 7-9 working days, which pales in comparison to Amazon’s same/one-day Prime delivery.