Online retailer backed by Mike Ashley’s Frasers Group issues profit warning

Profit expectations have been lowered at an online retail group, whose largest shareholder is Mike Ashley’s Frasers Group, despite a positive set of half-year results.

Lancashire-headquartered Studio Retail Group has warned its full-year adjusted pre-tax profits are now set to be between £35m and £40m, down from the previous range of £42m to £45m.

In a statement issued to the London Stock Exchange, the group added that despite “short-term headwinds” its strategy for growth “remains intact and we maintain our £1bn revenue goal in the medium term”.

READ MORE: Name revealed for landmark £36m office block with Europe’s biggest living wall

The group also said it is “not immune to the well-publicised market headwinds and has had to manage challenges in product shipping which has driven up costs in this area”.

The downgrade comes as the group reported a revenue of £239.6m for the six months to September 24, 2021, up from the £232m it posted for the same period in 2020.

Its pre-tax profits also increased from £15.9m to £26.5m while they rose from £17.4m to £23.7m on an adjusted basis.

Chief executive Paul Kendrick said: “I am pleased with how the business has built on the success seen during FY21 in delivering a solid trading performance in the first half of the year.

“There are undoubtedly more near-term headwinds for all retailers, but we are confident that the proactive decisions we have taken will leave us well placed to navigate these.

“We continue to focus on our strategy set out in June, and our objective remains to drive growth with Studio’s outstanding digital value proposition for its customers at the forefront.

“We remain confident in our medium-term targets.”

During the period the group completed the sale of Findel Education for £30m.

The group added: “Again, as with the wider market, we have seen lower availability of staff to fulfil temporary roles in our operations.

“However, by putting in place peak season pay enhancements, we are now at a point that we can cater with the demand forecast through December, so customer orders are despatched in readiness for Christmas.

“As we go into FY23 we are anticipating wage increases due to inflation and increases to national living wage.

“Studio typically delivers around 40% of its full-year product sales during Q3, the period that includes Black Friday and Christmas.

“Our core seasonal ranges have sold well throughout peak and although sales of certain ranges, notably ladies clothing, have been slower than expected, they have recovered well in the last two weeks.

“Our impression is that customers are shopping more selectively this year given inflationary pressures and the recovery from the pandemic.

“The supply chain challenges have added cost and gross margin pressure that has only partially been mitigated through pricing.

“We have also recruited fewer new customers due to marketing media inflation, lower availability hindering conversion, plus changes previously described in our financial services strategy that have had more of a short-term impact than anticipated.”