TheWorks.co.uk plc investor presentation. Throughout this quarterly presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO Gavin Peck. Good morning, everyone.
Good afternoon. Good afternoon, everyone, and thanks for joining us today. Rosie and I look forward to updating you on the significant financial and strategic progress we've made in the first half of FY 2026 and the robust stock performance we've delivered through peak trading. There will be plenty of time to answer questions at the end. So, in summary, we've had a significant strategic progress in the first half with strong stock performance and improved profitability. We're fulfilling our mission to become the favorite destination for affordable screen-free activities for the whole family. And that mission is something that is increasingly relevant given the growing desire from people wanting to reduce the time they spend on screens and research highlighting the negative impact of too much screen time, particularly amongst children.
Our continued execution of our Elevating The Works strategy, which we launched a year ago, is focused on us delivering on that mission, and we've made good progress across all three pillars of that strategy: growing our brand fame, improving customer convenience, and being a lean and efficient operator. That strategic progress is translating into a further improvement in our financial performance, with a significant improvement in first-half profitability. We've seen strong like-for-like sales growth of 4%, which is well ahead of the wider non-food market, sustained product margin growth, and ongoing cost savings, which has more than offset the headwinds of cost inflation, such as National Minimum and Living Wages and Employers' NI, and the impact of the fulfillment challenges we've experienced online. Our trading in the second half today is in line with expectations.
We've delivered robust like-for-like of +1.2%, again ahead of the wider non-food markets, which was in decline during the period. Online continues to be constrained by the fulfillment challenges, as expected when we updated in November, and we continue to deliver product margin growth and further cost savings. As such, we're on track to meet FY 2026 market expectations for GBP 11 million EBITDA, up from GBP 9.5 million last year, and deliver further sales and profit growth in FY 2027. I'll talk about the strategic progress we're making later, but for now, I'll hand over to Rosie to take you through the financial review, trading updates, and an outlook for the year to go and into FY 2027.
Thanks, Gavin. So first, I'll start by taking you through the highlights of the half year. We've delivered revenue of GBP 123.8 million, 0.3% lower than last year, and this was as a result of the timing of store openings and closures, with closures falling early in the period, whereas openings were weighted towards the end. Positive total company like-for-like of 0.3% reflects strong store like-for-like of plus 4% and negative online like-for-like sales of minus 36%. Our continued focus on sustainable product margins has seen significant margin growth of 330 basis points.
We've made great progress against our GBP 2 million cost reduction program, and because of these two areas, profit has significantly improved with a pre-IFRS 16 EBITDA loss of GBP 1 million compared to a GBP 2.8 million loss last year. Improved net debt position of GBP 5.3 million is compared to an GBP 8.5 million net debt this time last year.
It's worth reminding you that we typically make a loss in H1 ahead of our peak trading period in the golden quarter. So let's take a look at our sales performance against the external market dynamics. In a really tough retail environment, we've delivered strong store like-for-like sales. Consumer confidence remained weak throughout the period, with continued cost of living pressures, and as we approach the Autumn Budget, the uncertainty around tax rises. Inflation rates remained high throughout the period, with CPI at its highest since January 2024, and the retail sector footfall was down year on year for each month of the period. In a challenging external market, with the BRC reporting non-food like-for-like growth of 0.6%, we're extremely proud of our strong store like-for-like sales performance of 4%.
The positive performance reflects growth in our existing stores as a result of the delivery of strategic initiatives, including strengthening our brand marketing and launching new products. Gavin will talk more about these initiatives shortly. The online sales decline of 36.1% reflected the significant fulfillment challenges experienced from the move to our new third-party fulfillment provider in early September. A number of material interventions were made to the customer offer to dampen customer demand and preserve the experience for those customers who continue to shop this channel, so let's take a look at our progress on product margin. Our continued focus on sustainable product margins resulted in strong margin rate growth year on year, increasing by 330 basis points to 62.6%. We achieved significant margin growth of 270 basis points from a combination of better buying, which entailed stronger negotiations with suppliers and improved control of product mix.
We continue to focus on reduced markdown and better stock management, and we targeted selected price increases in the period. The hedged FX rate gave a small margin uplift on payments made in US dollars, with a rate of 1.28 versus 1.26 in the prior period. Favorable container rates created a further tailwind of approximately 20 basis points during the period, with average container rates at $2,600 versus $2,900 in H1 last year. This growth in product margins, along with the cost savings, drove significant improvement in profitability for the period. Heading into FY 2026, we face significant cost headwinds coming out of the Autumn 2024 Budget, from 6.7% higher National Living and Minimum Wage rises, business rates, and the increase to 15% National Insurance contribution rate, which impacted us from April 2025 onwards.
The combination of this for a full year of FY 2026 gave us a headwind of GBP 6.5 million. That strong product margin growth that I've just talked about improved profits in H1 year on year by GBP 4 million, helping to mitigate some of these significant cost headwinds. Amidst the online fulfillment challenges, tactical control of online marketing spend to constrain demand benefited variable web running costs by GBP 1.2 million, with store payroll costs increased by GBP 2.4 million, reflecting the H1 impact of those Autumn 2024 Budget increases. Year-on-year savings in our distribution costs were made as a result of the investment in a new mezzanine floor at our retail distribution center. This reduced third-party storage and increased efficiencies internally.
Brand marketing costs increased, reflecting investment in activity to grow brand awareness, with a focus on campaigns supporting families to spend quality time together away from the screens.
We've made really good progress in H1 against the GBP 2 million cost reduction program, with savings across central and administrative costs. And action was taken helped more than offset the headwinds faced in H1 to deliver an improved EBITDA position for H1 versus last year. So let's look at the changes to our store estate. We continue to optimize our store estate. We traded from a smaller, more profitable estate during H1 compared to H1 last year. This did result in a small decline in revenue, as I've mentioned, but we've now got a more profitable store estate with over 98% of the estate profitable. And we ended H1 with a net increase in our store estate, trading from 505 stores at the end of the period, with a net two new stores in H1 up from 503 at the year-end.
We've increased capital investment in H1 and improved the net debt position. The increased investment in the year reflects new stores and relocations, with seven new stores opening and one relocation in H1 compared to three new stores and two relocations in the previous period. We've invested GBP 0.6 million with the introduction of the mezzanine floor I mentioned, which has increased the storage capacity and enhanced our efficiencies. The operating cycle of the business causes our maximum stock levels to occur prior to Christmas sales peak, and therefore stock levels at the end of H1 are generally higher than at the year-end. Gross stock levels at H1 period end reflect the lower-than-anticipated online sales, and we plan for certain stock lines to come in earlier than the prior year. So I'm now going to give you a bit more detail of the online challenges that we faced.
As you may recall, online fulfillment issues with our previous third-party provider in Christmas 2024, along with their lack of openness when addressing those issues, led to the decision to move to a new fulfillment provider, which we selected in Q1 2025 after a comprehensive tender process. The new third-party provider was selected with a good, strong cultural fit and a proposed solution based on proven technology. However, the transition to the new provider in September met with issues from day one. Failures from planning through to implementation have been recognized by our third party. We've worked extremely closely with them to minimize the impact of our customers and our profitability, particularly over our peak trading period.
However, a lot of these issues could not be resolved in a live operational environment, and this led to significant capacity constraints, over 66% lower than through peak, and an inefficient and inaccurate operation, which resulted in poor customer service, significantly lower sales, increased fulfillment costs, and increased customer refunds. The new provider is open and honest regarding these shortcomings and remains committed to resolving issues, and as such, we're working together to find a long-term solution. We'll update further alongside the full-year trading update in May 2026. So let's take a look at H2 and how it started to perform. Strong store performance and product margin growth are driving profitability over peak. For the 11 weeks ended the 18th of January, we delivered positive store like-for-likes of 1.2%, which was well ahead of the BRC's non-food retail sector like-for-like decline of 0.4%.
Online challenges resulted in negative sales of -51.8%, which resulted in the overall total like-for-like of -4.2%. Our focus on product margin resulted in a 200 basis points growth in margin over peak, which reflected our planned investment in Black Friday promotions and into the January sale. So looking ahead at our full-year outturn, we're on track to meet external expectations of EBITDA growth in FY 2026. We've delivered a good peak trading period in stores, and with this key trading period behind us, we have good visibility of our full-year outturn, and we will deliver profit growth to 11 million EBITDA compared to 9.5 million last year. Cash is expected to be broadly in line with the prior year, reflecting the increased capital investment, and we're expecting to spend approximately GBP 7 million, which includes these five net new stores for the year.
Looking ahead at FY 2027, we're well positioned to deliver further operational progress and profit growth in FY 2027. We're continuing to drive sales growth through our strategic initiatives, and as previously mentioned, we're working through a resolution for online. We'll make further cost savings across central and operational costs, and along with a continued focus on delivering strong product margin through ongoing supply negotiations, careful product mix, and stock management. We'll continue to grow our store estate, adding a net 10 new stores to the portfolio, and all of these actions will help mitigate the National Living and Minimum Wage headwind and drive significant EBITDA growth for the year. Thanks for listening. I'll now hand you back to Gavin to take you through the strategy.
Thanks, Rosie. As mentioned earlier, we launched our new strategy to elevate The Works this time last year. We've made great progress on delivery of that strategy in the last 12 months, and I'll update on that shortly. But just before that, I wanted to step back to talk about our mission and the brand that we are building as part of that strategy. We live in a digital age where technology and screens are everywhere, and overall, that technology is undoubtedly making our lives better. However, two things are becoming increasingly evident. There's growing evidence of the negative impact of too much screen time and what people are doing on those screens, particularly children. Just this week, the government announced a consultation regarding the potential banning of social media for under 16s, as happened in Australia in December last year.
People are increasingly wanting to find ways to reduce their time and find other ways to connect and spend their time away from screens. We see and hear that anecdotally. I feel it as a father of two young girls, and we also see it in the research we've undertaken ourselves, as I'll cover shortly. At The Works, we are perfectly placed to support with this growing desire to reduce screen time, providing our customers with ideas for feel-good ways to spend their time and to connect with themselves or with each other through activities such as reading, learning, creativity, and play, which plays into our purpose, and making those activities affordable and accessible to all.
That's what we call time well spent, which is our brand strapline, be that reading a book while on holiday, crafting with the kids on a rainy day, playing a board game as a family on a Saturday night, all time well spent courtesy of the Works. Our mission to become the favorite destination for screen-free activities for the whole family is more relevant than ever and is now at the heart of everything that we do. Our Elevate in The Works strategy is bringing that to life, along with what we want to be famous for as a brand: great value, fantastic ranges, and screen-free activities. Delivering on this mission, I believe, will ensure that we establish a clear position in UK retail and a reason for the Works to exist for generations to come.
We started talking about this at Christmas before last and all through last year, and we can see it resonating really well with pretty much all stakeholders we've spoken to, whether that's colleagues, customers, suppliers, landlords, or investors. And as Rosie just talked through, it started to come through in our financial performance. So, as mentioned, our mission is at the heart of everything that we do at The Works, and our Elevate in The Works strategy supports us with fulfilling it.
In delivering on our strategy, we're looking to elevate The Works, transform our business and performance, which would drive a step change in sales to over GBP 375 million, adding GBP 100 million from FY 2025 levels, and a material improvement in EBITDA margins to at least 6%. That strategy has been delivered through those three key drivers, as I mentioned earlier, and I'll run through progress on those shortly.
Now, while we're making progress, there's still lots to do to deliver the strategy across all areas of the business, but importantly, we've got a clear plan of what we're going to do, when, and what that will give us. We're making progress in all areas, and we're seeing the benefits from that, and I remain more excited than ever about what it can do for our brand and for our performance. So, just looking at the significant strategic progress we've made in the year-to-date, the first pillar of growing our brand fame is all about bringing our new brand identity to life. We know that The Works is loved by its core customers, but we remain one of the best-kept secrets in UK retail, and I'm bent on addressing that, particularly in terms of who we are and what we offer.
So, in the year-to-date, we've been embedding that time well spent in screen-free positioning through our marketing strategy, much more focused on customer missions, and I'll cover some examples of that shortly. We've been putting extended ranges into larger stores and online, typically new brands at slightly higher prices to complement what we currently sell, including Block Tech, which is the value alternative to LEGO. We're growing our world year-round appeal, particularly through regular new drops of products across all of our categories. That's increasingly key to our proposition so that when customers come in, there's something new to excite and delight them. It's helping to drive repeat visits, and that newness has been working particularly well in kids' toys and adult craft. And then leveraging other moments and seasons.
So, we had a strong back-to-school trading period, which is ahead of the market, and we delivered double-digit growth in our Halloween sales. We've also continued to improve both the standards and customer experience in our stores and the consistency of these across the store estate. And that's been a key driver of growth in average transaction values and like-for-likes in stores. And that service level is a real key differentiator for us against some of the competition that we have, for example, the general merchandise discounters. The second pillar is improving customer convenience. That's really all about how customers are continuing to demand increased convenience. And as a retailer with over 500 stores and a transactional website, that's great news. In the year-to-date, we've improved product availability and stock allocations.
We've had projects to better support our top turnover stores, building on the success from last year and continuing to drive strong like-for-likes in that cohort by making sure that those top turnover stores have sufficient availability of products, particularly the ones that are highly in demand, and at the other end, we've had a separate project to look at compact stores where we're looking to reduce stock levels in those stores, remove slower turning stock, and improve the operational efficiency and helping to increase sell-through of seasonal ranges as those seasonal items are pushed through higher turnover stores. We've also improved the availability of products on new launches following the critical path projects we had last year, and we're consistently landing 90% plus availability on launch now. We've further optimized the store estate, as Rosie's mentioned earlier.
Stores remain the lifeblood of our business and will do for some time. Over 90% of sales, 98% are profitable, and we're continuing to deliver positive like-for-like and margin growth through them. We've further improved the store standards, and we have launched a What Good Looks Like initiative, which we're also taking through into next year. Our store space optimization, where we're looking to tailor store ranges to better meet the needs of local customers, and I believe there's a huge opportunity for us in the coming years. It started last year. A resource that we appointed just under a year ago has joined, focused initially on undertaking analysis of performance of our current layout and informed trials that we've done in the first half. One of the first ones was we looked at university stores that over-index in art sales.
We've put in trial ranges and subsequently rolled that out to more stores. The last large store range extensions that I mentioned earlier have been pushed down out to further stores based on their success, so some of those ranges are now in up to 130 stores, and we're changing our space layout as we go into spring 2026, and that has seen, again, informed by data changes to things such as our book space to give customers more of what they are looking for, and finally, being a lean and efficient operator, this is all about the desire to continue to offer great value for money for our customers and also deliver sustainable profit margins, and to do this, we need to be a business that's lean, efficient, and simple. Rosie's already mentioned the action that we've taken to drive significant product margin growth and deliver significant cost savings.
The investment in the DC Mezzanine facility was extremely successful, GBP 600,000 capital investment. It reduced the peak capacity challenges we've faced in recent years, gave them a much more efficient way of working, reduced the need to utilize expensive third-party storage, and the benefits have pretty much delivered payback by the end of Christmas. We've scoped out the systems transformation work with delivery starting next month. This program of works is key to enabling our colleagues to perform their roles more efficiently, while also adding extra capability to what we're able to achieve. The new till hardware we piloted through Christmas and we ran through peak will be rolled out this year. We're starting the refresh of our back-office systems next month, as I mentioned, with delivery to begin around some of our supply chain systems in February.
This is part of a multi-year program of work that will step change our capabilities. I mentioned the importance of bringing our mission and brand positioning to life through more customer-focused marketing campaigns, which, rather than just in the past, as we've shouted about products and price. The Boredom Board was our first major campaign of FY 2026, and that really aimed to, through the school holidays, support a summer well spent, highlighting screen-free activities for parents and grandparents to do with their children or grandchildren over the summer holidays. It was supported by a survey we ran, which, and insights also from a child development expert and psychologist that we worked with called Dr. Amanda Gummer.
The Boredom Board itself was three children with the roles of Chief Family Officer, Outdoor Activity Director, and Head of Rainy Days, and they brought to life through videos, ideas, product recommendations, and practical solutions to help families across the U.K. when those dreaded words, "I'm bored," struck over the summer. And from the research we did, those words were expected to be heard over 600 million times in households in the U.K. in the six-week summer holiday. Our research also showed that over 40% of parents wanted to limit screen time but need practical alternatives to do so. And again, it was supported by the credibility from the insights from Dr.
Gummer, who was able to lean on opinion from her that when a child is bored, they use their imagination to come up with ideas and discover what truly interests them, and therefore boredom can spark creativity and independence. So, we got some great coverage. We got some really good cut-through off the back of press releases and the social media content. Our second campaign at Christmas was our Big Little Christmas campaign. That really was all about reminding people that the festive period is a time for families to spend quality time together. It highlighted that Christmas doesn't need to be perfect like you see on Instagram. It's those little moments that make Christmas special, whether that's writing a letter to Santa, decorating the tree, the naughty elf, playing games on Christmas Day, Christmas crafting.
It really encouraged families to put down their phones, controllers, and tablets, and pick up one of those activities that truly bring them closer. Again, our research showed that 60% of parents said festive family time is dwindling, with 73% of that attributing it to screen time. Again, we got great coverage and cut-through off the back of the press releases and social media content. This slide just gives more details of the progress we're making on our new store openings, which is a key building block of our strategy, and we have good momentum building. There's pictures there of recent openings in a wide range of formats. On the left, they've got Livingston Shopping Centre, we've got Braintree Outlet, Tavistock High Street, and Bedford Interchange Retail Park. We've currently opened seven new stores in the first half.
We expect to open 14 in the full year, plus another five relocations, and overall performance is in line with expectations. We've had good engagement with landlords on our Evolve Brand and Proposition in the second half of the calendar year, and there's still some who remember us as a pile-it-high, sell-it-cheap discounter. However, we're getting the message across now, and they can see the benefits of the Evolve brand and what we can bring to their centers. Now, as a recap, we want to open 60 net new stores in the next five years with payback of less than two years. We've got 100 locations where we believe we can open and get those returns.
We've recruited a senior acquisitions manager in the summer, and we've got a strong pipeline of new opportunities as we head into FY 2027, where we'll be looking to open a net 10 stores, which probably means opening 20 to 25 and closing or relocating 10 to 15. So, as we look forward into FY 2027, again, progress expected across all three pillars. In growing our brand fame, it's really all about continuing to promote that time well spent in screen-free messaging. We're starting to get more customer insight to support our future brand and ranging developments. We've got brand surveys and monthly reports now through YouGov. We're having customer focus groups, which are deep-diving into certain areas, and we started with a Christmas review in December.
We're looking at updating our customer personas work, which will give us a better understanding of who our core customer focus groups are and what's important to them. We'll continue to refresh our categories, bringing in new ranges and products all the time, continuing to trial extended ranges, giving reasons for customers to come back and find something new. Again, we're looking at improving the customer experience in the stores with some training for our store colleagues. We want to ensure we're providing a fun, family-friendly, and inspiring experience for customers that will give them a real reason to visit and revisit the Works. In improving customer convenience, we've got lots of initiatives going on to further improve our stock flow, and that will include systems and processes. We're looking to, as I just said, add a net 10 new stores in FY 2027.
We've got further space optimization trials and initiatives building on the work I talked about earlier. And in terms of the online channel, finding a solution to the challenges faced, as Rosie referenced earlier, and then developing that proposition. In terms of being a lean and efficient operator, we believe we can drive further product margin growth, although we've made the step change, so now it's more incremental. We've got additional cost savings targeted for FY 2027, as Rosie mentioned. And the investment in our IT systems and infrastructure transformation will really pick up pace. So, we're investing in replacing outdated and inefficient systems. And alongside that, we'll be reviewing our business processes to drive further efficiencies. So, in summary, I'm delighted that our mission to become the favorite destination for affordable screen-free activities for the whole family is resonating well with our customers, both existing and new.
As I said, this has never been more relevant, and I'm proud of the role The Works is playing in supporting our customers to find alternative ways to connect and spend their time away from screens. That mission is being delivered through continued execution of our Elevate in the Works strategy that has driven the significant improvements in our H1 profitability. Second half trading is in line with our expectations, the robust store like-for-likes and continued product margin growth and ongoing cost savings, and having delivered our peak trading period, we have good visibility over the year to go. So, we're on track to meet market expectations in FY 2026 and deliver further profit growth in FY 2027. There's still lots to do, and we're excited about the opportunity that's ahead of us. So, that brings to the end of the presentation. I will now open it up for questions.
That's great. Well, thank you very much for your presentation. What I'll do at this point is I'll just bring your cameras back up for the Q&A session. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the Q&A tab, which is situated on the top right corner of your screen. We have received a number of questions, both pre-submitted and throughout today's live presentation. And I want to start the Q&A session off with this one here. Why has online sales performed so badly if new provider is better than the last one?
Rosie, do you want to take that?
Yeah. Well, I think, you know, hopefully I covered it in the presentation, giving you a bit of background towards the previous online fulfillment provider and why we had to transition to a new one in September. Unfortunately, we've just had operational issues at the third-party center from issues in setup, planning, and through to implementation. And as a result of us then heading into peak, we weren't able to, well, the third-party provider wasn't able to correct those issues in time for peak because we were already operating in a live environment. So, as a result, they couldn't meet the capacity demand of our peak trading, and we therefore had to actively constrain our capacity through reducing online marketing, which obviously had a significant impact on our online sales.
That's great. Thank you very much. Maybe moving on from this, the next question here, what's the realistic timeline for online to recover, and what level of online sales is assumed in FY 2026, FY 2027 guidance?
Okay, so, yeah, we're currently working with the provider and can't really say much more than that at the moment, other than that we do expect to update the market when we come out in May with our full-year trading update. We are obviously forecasting to be in line with our external expectations of our pre-IFRS 16 EBITDA of GBP 11 million, and that incorporates the online sales reduction that we're seeing currently and that we've reported in these numbers, but we don't actually formally disclose the separate revenue between online and sales and stores.
That's great. Thank you very much. The next question here. From the outside, given the fulfillment issues, higher costs, and lost sales, it looks like online may be loss-making on a fully loaded basis: fulfillment returns, customer service, IT, and marketing. Can you confirm whether it is profitable today? And if it isn't, are you considering switching to a browser-only website and exiting online ordering to remove complexity and free up management bandwidth for the core store business?
Yeah, I'll take the start of this, and perhaps Gavin, you can just chip in with the strategic side. Yes, we are currently expecting online will be loss-making in FY 2026 numbers, which is why we're extremely proud of the position that we've got to from H1, and then for the full year, still meeting GBP 11 million EBITDA expectations despite the online challenges and the fact that, yes, we expect to be loss-making in FY 2026.
Yeah, and strategically, you know, part of our five-year plan was to grow both stores and the online channel at similar rates. So, online penetration of just under 10% was expected to stay there, but the online sales would grow. And, you know, plan A is still very much that we believe there's an opportunity to grow our online sales and get that back to profitability. So, things like we've been looking at journey improvements for customers on the site. We don't currently offer pre-order for books, which is a huge part of the book market that we'd like to be able to offer online. And improving sort of our click-and-collect model where you currently have to wait up to three days. We're trying to do that same way. We expect it to drive further sales growth. So, you know, that's still plan A.
Plan A is finding a solution that delivers on that profitably with our current provider, as Rosie has just talked through. But yes, we will, if either of those aren't achievable, we will be considering what other options do look like, such as just going to a click-and-collect only from store model or having a non-transactional website. But yeah, plan A is very much to get back to the strategy that we believe can have online growing and profitable.
Thank you very much. Last year, you had GBP 1.2 million of exceptional fulfillment costs, mainly due to Christmas trading. What level of exceptional fulfillment costs are you expecting for the full year, given that issues appear to be worse this year?
Yeah, I'll take this one. Yes, we did have the costs last year, obviously in relation to our previous third-party provider. We will expect a small degree of exceptional costs over H2 in relation to these issues. However, because the issues are slightly different, we've had more of a profit impact from the reduced sales, as well as obviously seeing the higher operational costs coming through and increased customer refunds, etc. So, we will be treating these on a separate basis because the issues are very different. However, we are expecting a small amount of exceptional costs in H2 in relation to those.
Thank you very much, Rosie. Another question we have here. Have you done any research into how competitors have responded with price rises post-April 2025 cost rises and how your 1.4% price and promotion refinement compares?
Yeah, if I take the first part of it, and then Rosie, if you clari FY the 1.4%. So, yeah, I think we look closely at competitors, and we can see competitors putting prices rising, particularly in response to the sort of National Living Wage and employers' NI, as referenced in April last year. We put some selectively, too, ourselves, but we still feel that we are great value for money versus the competition. And actually, I've also seen, particularly around Christmas, there's still a huge amount of discounting in the sector, particularly within toys and games. So, yeah, it's something we keep on top of regularly. We still believe we're great value. But yeah, we've also seen ourselves and other competitors move up prices selectively.
Just double-checking the second part of that. Yeah, so the 1.4 margin rate impact that we've seen from focus on price and promotion is looking at sort of like maximizing the promotions that we've got. So, looking at our book promotion of GBP 3 for GBP 7.50 and things like that, and small price increases around the promotions rather than actual across-the-board price rises.
That's great. Thank you very much. Another question here. Please, can the company consider paying a dividend to increase shareholder value?
Yes, certainly. So, I'll answer that one. So, we do continuously assess this as we know this is at the front of a lot of our shareholders' minds. However, we do speak with our shareholders regularly to understand their views on this because historically, we've actually had dividends voted down at our annual general meeting. So, we have to take the balanced view of our widespread shareholder base, but we continue to assess those against the future shareholder distributions against other opportunities for investment as our profitability and funding allows. And at the moment, we believe we've got a lot of reinvestment in the business to make where we can get much greater returns as it currently stands, but we will continue to assess this.
That's great. Thank you very much. Another question here. Past traffic levels were 30 million visitors per year. Is that broadly still at those levels, or have online issues led to drop in visitors?
Yeah, I think on a normalized basis, I would have expected that number to have increased rather than decreased, but as Rosie mentioned, given the fulfillment challenges we had that constrained the capacity that we could fulfill, we were forced to reduce, or we decided to reduce our marketing spend, which meant we were driving less traffic to the website and therefore controlling demand because we couldn't physically fulfill that demand, so visitor numbers will have fallen, but my expectation would be if we were to have a normal trading year again, we would be at least 31 million visitors per year.
Thank you. Another question we've received. How do you plan to maximize sales during key festive periods like Easter, Halloween, back to school, and Christmas?
Yeah, I think first and foremost, it's about having great ranges for those seasons, particularly focused on our categories of reading, learning, creativity, and play, and it's really about how we market those ranges to our customers, giving them ideas and inspiration of what to do during those seasons, and then working with the right partners on social media influencers to reach our target audience, which is typically moms and families.
That's great. Another question that's just come in. Have you explored a store-in-store format rather than standalone stores?
Yeah, we've looked at it in terms of us putting a store inside a bigger retailer. We've got some close to that within some of the supermarkets, but they tend to be more a standalone unit. I think what we've found is we've still got plenty of opportunities on a standalone basis to have our own store, giving good payback, and actually the footfall there is better than we would probably expect to get inside another retailer. So, it's something that we'll certainly keep exploring and ultimately have discussions with other retailers. But for now, our focus is on sort of growing organically through our own stores.
That's great. And we've got one final question at the moment. At the preliminary results in July, you mentioned you signed up to YouGov to receive monthly metrics. What has the data shown, and have you leveraged it to optimize store performance and product mix?
Yeah, so we're seeing that now. I think we've had five or six months' worth of that data, which is great. It's less probably about it giving us insight to optimize store performance or product mix. It's much more about what are customers saying about our brand overall, and we're still at the early stages. We almost need to get to a full year's worth of data to start seeing seasonal trends, but a couple of things that stand out is we're actually quite well known as a brand in terms of people can recognize when prompted The Works, but what we are less well known for is then people who would consider shopping with us or actually physically buying from us.
We need to do a bit more research to fully understand that, but we believe a big part of that is that people remember the Works from five, ten years ago when we were a different model and a pile it high, sell it cheap discounter. And that does put some people off and has been a barrier in past research that we've done. So, we'll work to better understand that, and then ultimately all the work we're doing around getting the brand out there will address that. And then also, it's highlighted that we've probably got more work to do just to highlight to customers, new and existing, actually, that around the quality of our product and also how regularly we have new and trending products landing. So, we're working through that, getting further insight.
But yeah, it's invaluable data that can start to highlight more so how we actually talk about our brand and where.
That's great. Apologies. I did say that was the last question, but another one has just come in. Have you considered online events for offline activities, e.g., crafting? It seems to me there's an opportunity to build some sort of online community if you had any thoughts on that.
Yeah, I think what we are doing is we have a blog that gives ideas for what to do, whether that's on the website, so coming into school holidays, here's some ideas, printable sheets for coloring and various other activities to do, so we're starting to do some of that. We know within our product categories they are highly engaged customers, so the crafters are extremely passionate, so we've looked at do we sort of create mini communities there, and I think that will be the next sort of natural extension of that, but at the minute, partly resource constrained, but also just sort of finding our way and working out what works best for us, but we are starting to give that. That's the big part of our inspiration and ideas and inspiring reading, learning, creativity, and play.
That's great. Well, thank you very much for answering those questions for investors. Of course, the company can view the questions submitted today, and we will publish the responses on the Investor Meet Company platform. Just before redirecting investors provide with their feedback, it's particularly important to you both. Gavin, could I just ask you for a few closing comments?
Yeah, thank you. Yeah, I'd just like to say thank you for your interest and for joining. We are making good progress. As I say, we've got that really clear mission that is more relevant than ever and feels like it's really resonating with our customers, which is pleasing to see coming through in our financial performance. So, we're optimistic about what we've got ahead of us in the next three or four months of the current financial year and then into further growth in FY 2027 and beyond. Thank you.
That's great. Well, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback? The management team can better understand your views and expectations. Path to management team of TheWorks.co.uk PLC. We'd like to thank you for attending today's presentation, and good afternoon to you all.