Accrington’s Studio cuts profit expectation, shares fall

Shares of Accrington-based home shopping firm Studio Retail Group plc (SRG) — formerly known as Findel — fell about 22% on Thursday after it cut its expectation for full-year adjusted profit before tax to £35 million-£40 million from £42 million-£45 million.

Studio Retail Group reported first-half revenue of £239.6 million for the 26 weeks to September 24, 2021, up 3.2% on the prior year, and up 32% over two years.

Adjusted profit before tax was up 36% to £23.7 million.

However, in its “current trading and outlook” section, the company said: “Studio is not immune to the well-publicised market headwinds and has had to manage challenges in product shipping which has driven up costs in this area.

“This will lead to selling price inflation going forward, although we have competitive monitoring tools to ensure we retain our value position.

“In addition, we have faced some product availability issues as deliveries were delayed, but we 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.

Again, as with the wider market, we have seen lower availability of staff to fulfil temporary roles in our operations. 

“However, by putting in place peak season pay enhancements, we are now at a point that we can cater with the demand forecast through December, so customer orders are despatched in readiness for Christmas. 

“As we go into FY23 we are anticipating wage increases due to inflation and increases to national living wage.

Studio typically delivers around 40% of its full-year product sales during Q3, the period that includes Black Friday and Christmas.

“Our 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. 

“Our impression is that customers are shopping more selectively this year given inflationary pressures and the recovery from the pandemic.  

“The supply chain challenges have added cost and gross margin pressure that has only partially been mitigated through pricing. 

“We have also recruited fewer new customers due to marketing media inflation, lower availability hindering conversion, plus changes previously described in our financial services strategy that have had more of a short-term impact than anticipated.

We will give a further update on this key trading period at the end of January but our current expectation for the full-year outturn of Adjusted PBT is now in a range of £35-40m (previously £42-45m).”

Group CEO Paul Kendrick said: “I am pleased with how the business has built on the success seen during FY21 in delivering a solid trading performance in the first half of the year.

“There are undoubtedly more near-term headwinds for all retailers, but we are confident that the proactive decisions we have taken will leave us well placed to navigate these.

“We continue to focus on our strategy set out in June, and our objective remains to drive growth with Studio’s outstanding digital value proposition for its customers at the forefront. 

“We remain confident in our medium-term targets.”