ProCook warns on profits as consumers tighten their belts

10th Jun 2022 07:35

(Sharecast News) - ProCook warned on profits on Friday as it said consumers were tightening their belts, sending shares in the kitchenware retailer tumbling.

The company said trading since the fourth quarter ended on 3 April has been impacted by "increasingly challenging" market conditions, with customers hit by well-documented pressures on discretionary spend. It also highlighted "exceptionally strong" comparatives from the prior year, when it was boosted by pent-up demand after Covid restrictions were lifted and retail stores reopened.

ProCook said its like-for-like sales have weakened across all channels, in line with the wider kitchenware market. Still, revenues remain "significantly higher" than the comparative pre-Covid period in 2019.

The group said it's still attracting an encouraging number of new customers to the brand - 89,000 in the first eight weeks of the year - but the difficult consumer backdrop has had an impact on average spend, conversion and repeat rates.

"Considering the more recent trading conditions and the ongoing pressures on discretionary consumer spend, we now assume the kitchenware market will remain highly challenging for the remainder of FY23," it said. As a result, revenues for FY23 are expected to be broadly in line with the £69.2m achieved this year.

"Our expectations are that gross margins will remain broadly consistent year on year, and we will continue to manage our costs carefully to ensure we operate an efficient business model," it said.

ProCook now expects to deliver adjusted pre-tax profit of between £4m and £6m for FY23. This would be down from an expected adjusted pre-tax profit of around £10m for FY22.

Chief executive and co-founder Daniel O'Neill said: "There are clear and numerous pressures on consumers at present which are impacting discretionary spend across retail as a whole and kitchenware is no exception.

"Whilst we are still seeing lots of new customers discovering the ProCook brand and buying our products, it is clear that many are tightening their belts. This creates a difficult short-term trading environment, but does not distract us from our strategic priorities, as we work towards our mission of becoming the first choice for kitchenware."

At 0815 BST, the shares were down 38% at 48.23p.

Russ Mould, investment director at AJ Bell, said "ProCook has served up a dog's dinner of a trading statement".

"The pots and pans seller joined the stock market after a period of success where the nation was stuck at home during lockdown and many people embraced their culinary skills.

"Now we've got a squeeze on consumer spending and a lot of people have found they can only afford the essentials in life. So, the idea of buying a new cast iron frying pan or a new set of knives has been put on ice and ProCook's growth expectations have been pared back.

"Companies that deliver profit warnings in their first year as a listed business typically find it takes a long time to win back the market's favour, as investors distrust anyone dishing out bad news so soon after floating."