Studio Retail Group shares tumble on profit warning

Studio Retail Group saw its shares plunge Monday morning following a profit warning by the British value retailer.

The group said it expects its adjusted pre-tax profit for the full year to come in at between 28 million pounds and 30 million pounds, the second time it has slashed its outlook in just a few months.

In its half-year results published in November, the group dropped its adjusted pre-tax profit outlook from between 42 million pounds and 45 million pounds to between 35 million pounds and 40 million pounds.

Its shares were down 40 percent on Monday morning.

The group, formerly known as Findel, said supply chain issues have led to higher shipping costs and late-arriving unsold stock of continuity ranges, which has meant higher levels of inventory than normal at this point in the year.

The group said demand in the early weeks of January has been “relatively subdued”.

On a more positive note, it said trading improved as the third quarter progressed, helped by greater availability of stock in November and December when key shipments were eventually undocked.

Q3 sales above 2019 levels

Sales in the quarter were down 10 percent compared to the third quarter last year, but the group noted that Q3 2020 was an “exceptionally strong” comparable quarter, as the online retailer benefited from shoppers flocking to online channels during national lockdowns.

Compared to the third quarter of 2019 - prior to the outbreak of the pandemic - sales were up 18 percent.

“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,” said group CEO Paul Kendrick in a statement.

“The trading performance over Christmas, with sales up 18 percent 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,” he said.

The group’s total active customer base dropped 2 percent from last year, but was up 23 percent compared to two years ago.