Shares spark as The Works closes online business, lifts 2027 profit outlook

(Sharecast News) - The Works shares surged on Friday after the retailer said it was closing its online business with immediate effect and upgraded its earnings outlook for 2027. The company said operational challenges experienced by two different third-party fulfilment partners had significantly impacted the online performance in the last two financial years, outweighing the progress made.

"Given these issues, the channel's relatively small and reducing revenue contribution and loss-making performance, the board assessed a wide range of options and has determined that the channel is no longer sustainable, with the optimal solution being to move to a non-transactional website," it said.

The closure is expected to cost around £2m, and the online channel will be accounted for as a discontinued operation. These exceptional costs will be recognised in FY26.

The Works said the transition is expected to have a small negative impact on its cash position in FY26 but this will be broadly neutral by the end of FY27, with the closure costs offset by reduced working capital from lower inventory levels going forward.

"Longer-term, the decision to exit is expected to be cash flow positive," it said.

The company also said on Friday that it was lifting its FY27 guidance for pre-IFRS 16 adjusted earnings before interest, tax, depreciation and amortisation to £15m from £12.7m. This reflects improvements made to the core business and the removal of online losses.

The Works said it has continued to deliver a positive store performance, with like-for-like sales up 3.3% in the year to date, and remains on track to deliver FY26 pre-IFRS 16 adjusted EBITDA of £11m, in line with current market expectations. Adjusted for continuing operations only, FY26 guidance was restated to pre-IFRS 16 adjusted EBITDA of £13.5m.

Chief executive Gavin Peck said: "We have reached this decision after a thorough assessment of the options available and are confident that focussing on our successful bricks-and-mortar business is the right step to reduce risk, improve operational clarity and support long-term profitable growth. A website that enables customers to browse our products and seek inspiration will help to bring our brand to life and drive customers to our 500 stores.

"Our mission - to become the favourite destination for affordable, screen-free activities for the whole family - has never been more relevant and this, combined with ongoing delivery of our 'Elevating The Works' strategy, means we are well-positioned to achieve significant and profitable growth in the years to come."

At 1140 GMT, the shares were up 14.3% at 42.16p.

Russ Mould, investment director at AJ Bell, said: "Online isn't everything if the economics don't stack up. The Works has called time on web sales after deciding that its future lies in bricks and mortar.

"It stocks low-ticket items that individually don't lend themselves to being sold online as the postage costs are likely to be much greater than the actual product. The only way its web sales would ever thrive is if the customer bulk-bought items.

"It's a similar rationale to the one Primark adopted in shunning the internet for years, although it has found a happy medium through click and collect.

"The strategy shift won't alter much for The Works apart from a financial hit linked to closing its web services. More than 90% of its sales come from its physical stores anyway, and management will now be free to focus all their attention on this sales channel.

"Focus will now shift to other value retailers to see if they can make online services stack up or admit defeat. Card Factory is one step ahead in this regard, having closed its Getting Personal website a year ago and pivoted its main website to focus on personalised products."

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