Studio Retail Group issues profits warning amid “shipping issues”

// Studio has warned its profits are set to be lower than market expectations and is to raise its prices

// Studio is now expecting adjusted pre-tax profit for the full year to be in a range of £28 million to £30 million

Online value retailer Studio Retail Group has warned its profits are set to be lower than market expectations and that it will be looking to raise its prices.

The Lancashire-headquartered listed company has said its adjusted pre-tax profits for its full financial year are now likely to be between £28 million and £30 million, down from the current market expectation of £35 million.

In a trading update for the third quarter period, to December 24, the group revealed the 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.

Product sales in the eight weeks prior to 25 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 were eventually undocked. This meant that 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, Studio said third quarter product sales were up 18% to bring total growth for the first 39 weeks of the financial year to 28%.

Studio Group chief executive Paul Kendrick said: “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 2.3 million. We will continue to drive the long-term profitability and success of the group.”

Giving an update on its fourth quarter, the retailer said it expects to revert to more normal trading conditions this year, assuming no further Covid-19 lockdown restrictions are introduced.

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

The retailer has also announced that it is 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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