Shares in The Works (WRKS) rallied 6% to a six-month high of 57p after the books-to-toys retailer delivered another earnings upgrade off the back of strong Q4 trading.
The raised outlook demonstrates that CEO Gavin Peck’s ‘Elevating The Works’ self-help strategy is paying off.
Selling affordable, screen-free activities for the whole family, The Works recently closed its loss-making online operations in order to focus on its successful bricks-and-mortar business.
Another EBITDA beat
Thanks to robust revenue growth, product margin improvements and cost-cutting, The Works now expects adjusted EBITDA for the year ended 3 May 2026 to come in at £14 million. That represents a bumper 47% year-on-year increase and is ahead of the £13.5 million the market was looking for.
Total revenue for FY26 rose 3.2% to £260 million with growth achieved across all four of the Birmingham-based retailer’s key product categories: arts and crafts, stationery, toys and games, and books. Like-for-like sales increased 3.3% in FY26.
But The Works racked up ‘especially strong’ Q4 same-store sales growth of 5.3%, supported by a positive impact on its physical stores from the closure of the online channel.
The arts and crafts-to-games seller attributed its outperformance of a subdued non-food retail market to ‘strong progress in the first full year of the group’s Elevating The Works growth strategy’. Peck also highlighted the ‘increasing relevance’ of the firm’s affordable, screen free activities catering to the whole family.
Well-placed for profitable growth
The Works is on track to deliver against recently upgraded FY27 EBITDA guidance of £15 million. The company also reiterated confidence in achieving its medium-term EBITDA goal of ‘at least’ £22.5 million in FY30.
Peck commented: ‘Our outperformance against the broader high-street supports our strong conviction that The Works’ brand and product proposition, which is aligned to families’ growing demand for affordable screen-free activities, is increasingly relevant and underpins our plans for further growth.
‘While we remain mindful of the challenging macroeconomic environment, the board is confident that The Works is well placed to achieve further strategic progress and profitable growth in FY27.’
Following the latest upgrade, Singer Capital Markets’ Matthew McEachran reiterated his ‘buy’ rating on The Works.
‘With a broad range of strategic and operational initiatives, and an emerging structural demand tailwind for affordable screen-free activities, the clarity and confidence around the equity story is increasing,’ insisted McEachran.
We share his optimism. The decision to shutter its online business looks a sensible one by The Works. Its low-ticket items lend themselves to in-store impulse purchasing rather than online delivery.
The value-oriented retailer has traditionally done well during straitened economic times as consumers trade down. Additionally, a net cash balance sheet gives us confidence The Works can weather the retail sector storm.
Read the press release here: https://corporate.theworks.co.uk/investors/
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