Retailer changes third party provider after capacity issues
The Works told investors in its annual report that it struggled to fulfil online orders at times in the last financial year.
By Simon Duddy, Editor, Logistics Matters
ONLINE SALES declined by 12.1%, impacted by temporary capacity constraints at a third-party provider.
During the first half of the year, efficiencies were delivered as a result of the move to an automated picking process for online fulfilment, the company told investors.
However, during the second half of the period its third-party online fulfilment centre faced significant and unexpected operational challenges.
The statement continued ‘This affected capacity and resulted in significantly increased costs per order. Due to these operational challenges, The Works proactively optimised online sales which resulted in a saving in digital marketing costs, and lower parcel delivery and packaging costs due to significantly reduced outbound volumes year-on-year’.
£1.2m of exceptional fulfilment costs were incurred in relation to higher costs per order versus planned levels due to the disruption and this was included as an adjusting item in the period.
Chair at The Works Steve Bellamy, said: “Although the business faced difficulties fulfilling online orders during peak, these issues were contained and the online performance improved significantly in Q4. Decisive action has already been taken, including the appointment of a new third-party provider, positioning the business well for the remainder of FY26 and beyond.”
The Works does most of its business through physical stories. It trades from 503 stores, of which 98% are profitable on an annual basis. Its store estate represents over 90% of sales.
Pre-IFRS 16 Adjusted EBITDA rose 58% to £9.5m (FY24: £6m), which was in line with recently upgraded market expectations. Rising cost headwinds were offset through ongoing cost-saving action and sustained product margin growth (+210bps vs. FY24).
The Works delivered total revenue of £277m, a decrease of 2% from the prior year, which benefitted from an additional trading week.
Bellamy added: “Excellent initial progress has been made on our three strategic growth drivers: growing our brand fame, improving customer convenience and being a lean and efficient operator. This transformation will take time, but momentum is building. As such, we remain on track to deliver sales in excess of £375m and EBITDA margin of at least 6% within five years.”
