Studio’s online and value-based offer produced strong trading during lockdown, with 55% y-o-y product sales growth in the first 11 weeks, which compares very favourably with its online peers. It looks well placed, with tight stock management, as the high street re-commences trading, which is likely to be very competitive. Due to the ongoing uncertainty from COVID-19 and the timing of the Education sale, management is unable to provide guidance for FY21e.
In the first 11 weeks of FY21, product sales increased by 55% y-o-y, with demand driven by the stay-at-home essentials of toys, fitness and garden products. Demand was driven by strong growth in active customers, which surpassed two million (rolling 12-month basis) for the first time, despite low marketing, and increased spend per customer. Although dilutive for profit margin, the sales performance should produce a higher cash margin. To date, requests for forbearance due to COVID-19 was quantified at 4% of outstanding balances and management is budgeting for it to deteriorate as unemployment increases.
The proposed sale of Education has been delayed, likely into CY21, as the Competition and Markets Authority has referred it to a Phase 2 review. The ongoing closure of schools in the UK is naturally hitting demand, therefore the focus is on managing costs.
The company’s financial position is significantly better than is typical at this time of year: net debt has reduced from £52.3m at the end of March to £30m. The delayed sale of Education will require renegotiation of the revolving credit facility from March 2021.
Due to the ongoing uncertainty from COVID-19, management is still unable to provide guidance for FY21. The results for FY20 will likely be published in the second half of August.