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TheWorks.co.uk expects material hit from store closures

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TheWorks.co.uk PLC (LON:WRKS) said the latest restrictions will have a material adverse effect on sales though profits and cash will be partly protected by the government’s furlough scheme.

The stationery retailer closed its stores in England on Thursday to follow the new lockdown measures, with a potential reopening scheduled for December 2 based on government guidelines.

READ: TheWorks.co.uk says summer performance topped expectations

It is hoping to recover the lost sales in December ahead of the key Christmas season.

The firm said performance in recent weeks has strengthened further and, to some extent, sales have been brought forward as customers have acted in anticipation of further restrictions.

Board games, jigsaws, art and craft materials and books for both children and adults have all been in high demand.

In the 26 weeks to October 25, sales shed 7% reflecting the impact of the closure of all stores for the first seven weeks of the financial year.

Excluding that period, overall like-for-like sales increased by 11% driven by broadly flat store performance and online growth doubling from last year’s numbers.

During the period, the company opened four stores and closed another eight as part of the optimisation of its portfolio, which totalled 530 shops at period-end.

As of October 25, net cash was £8mln compared to net borrowings of £14mln a year ago.

“Without the lockdown, we would be upgrading nicely (we actually have to downgrade this year to be conservative but keep outer years unchanged),” analysts at Peel Hunt commented.

“The key here is that the range is resonating loud with customers, with the value proposition being well received. It’s hard to think of another high street retailer producing like-for-like numbers like these but the valuation of the shares remains extremely dismissive.”

Shares shot up 28% to 21.49p on Thursday morning.

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