The Works warns of fears for the future amid Covid restrictions

Bosses at hobby retailer The Works have expressed concerns about the future after admitting the company could run out of money by breaching banking covenants due to uncertainties from the Covid-19 lockdowns.

All of The Works shops were shut during the lockdown
All of The Works shops were shut during the lockdown

The Birmingham-headquartered retail chain, which has stores across the region, said there are scenarios where it would breach its agreements with lenders in the next financial year, which "represents a material uncertainty that may cast significant doubt on the group's and the company's ability to continue as a going concern".

The company reported on Friday that in-person shopping restrictions over the last few months have seen revenue drop by nearly a quarter.

The 11 weeks since the company closed the first half of the financial year have brought increased Government measures to slow the spread of Covid-19 in the UK.

As a result, shops have been shut for parts of the period, and sales have fallen by 24.8 per cent, despite a 70 per cent jump in online sales compared with the same period a year ago.

"Our interim results and trading over the crucial Christmas period reflect a robust performance given the impact of store closures as a result of Government restrictions," said chief executive Gavin Peck.

"With our stores temporarily closed, we are, once again, focused on maximising sales through our online operations and carefully controlling costs whilst ensuring that we are able to reopen safely when restrictions allow."

In the six months to the end of October, revenue dropped by 7.8 per cent to £88.9 million, as the company's shops were forced to close for seven weeks during the start of the period to slow the spread of Covid-19.

However, when the stores were not shut, they significantly exceeded what the board was expecting, with like-for-like sales jumping by 10.6 per cent over the 19 weeks ending October 25.

And despite the blow to revenues, The Works managed to nearly halve its pre-tax loss from £8.5 million in the first half of last financial year, to £4.3 million.

The company also saw the Covid-19 crisis as a marketing opportunity.

Art, crafts, jigsaws and books formed part of a "beat the boredom" offer, when shops were open.

However, overall the firm cut its marketing spend and reduced promotions in a bid to make its online operations more profitable.

It also slashed costs by negotiating lower rents on some of its shops, and closed six outlets over the period, while only opening two new ones.

"When open, our stores have performed well and our online proposition has continued to resonate strongly, supported by the investment we made to increase online capacity," Mr Peck said.

"Our ability to continue to safely serve our customers and communities through these unsettling periods is thanks to the ongoing commitment and hard work of fantastic colleagues across the business, something I am incredibly proud of."

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