NEWS

Studio Retail Group forced to raise prices amid shipping issues

Published on: 1st February 2022

The company has warned of lower than expected profits and price increases caused by higher shipping costs and delayed stock.

Despite improving its performance on Black Friday and throughout the Christmas period, Studio Retail Group, which counts Mike Ashley’s Frasers Group as its largest investor, says supply problems will impact on profits this year.

Retail Gazette reports the company is now expecting adjusted pre-tax profit for the full year to be in a range of £28m to £30m, down from the current market expectation of £35m.

In a trading update for the third quarter period, to 24th December, the group says widespread supply chain challenges during 2021 not only led to higher shipping costs, but also to late-arriving unsold stock, which will need to be sold throughout 2022.

Sales in the eight weeks prior to 25th November were down 21% against the previous year, but in the remaining five weeks of its third quarter, they were 9% ahead as key shipments started to arrive. This meant sales ended up 10% below the exceptionally strong performance seen during the second national lockdown period last year.

However, comparing sales to pre-pandemic levels two years ago, it was reported that third quarter product sales were up 18%, bringing total growth for the first 39 weeks of the financial year to 28%.

Studio Group chief executive Paul Kendrick told Retail Gazette: “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.”

The retailer said it expects to revert to more normal trading conditions this year if no further Covid-19 lockdown restrictions are introduced.

Paul added: “This is also a period where consumers traditionally spend less on discretionary retail, and this is likely to be compounded due to higher living costs; notably fuel and energy price increases.”

The retailer is said to be exploring a range of options to meet a working capital funding requirement, including discussing its current level of working capital facilities with its long-standing UK lenders.

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