Studio Retail warns on FY profits, shares tumble

The company now expects to report full-year adjusted pre-tax profit of between £28m and £30m, down from 48.8m a year prior and £27.3m two years ago, and below market expectations of £35m.

Studio said demand in the early weeks of January had been "relatively subdued", with some margin erosion as it cleared some seasonal stock that could not be carried forward. This has been partially mitigated through the bad debt performance, which was better than expected, particularly due to improvements in the recovery rates achieved on defaulted debts.

"It is also likely that some of the actions to improve short-term working capital discussed below will further reduce margin in the remaining weeks of the year," the company said. "We have also incurred some further costs linked to the shipping delays and port congestion."

Updating on third-quarter trading, Studio said there had been an improvement as the quarter progressed, helped by greater availability of stock in November and December when key shipments were eventually undocked.

Product sales in the eight weeks prior to the interim results on 25 November were down 21% on the previous year. However, in the remaining five weeks of the quarter, which included Black Friday, sales were up 9%.

"This brings the performance for Q3 as a whole to 10% below the exceptionally strong performance seen during the second national lockdown period last year and, cumulatively for the first 39 weeks, down by 5%," it said.

The company noted that comparatives with last year are distorted due to lockdowns and that on a two-year basis, third-quarter product sales were up 18%, taking total growth for the first 39 weeks of the year against FY20 to 28%.

Studio also said on Monday that in line with the broader market, it will be lifting selling prices in the fourth quarter and into next year to offset inflationary cost increases.

At 0850 GMT, the shares were down 36% at 101.11p.