Marks Electrical shares dive on profit warning

The online electricals retailer said a hit to profit margins is set to see annual underlying earnings fall to between £5 million and £6 million.

Online electronics retailer Marks Electrical has revealed record sales for the past year (Marks Electrical/PA)

Marks Electrical has seen its shares plunge after warning over profits as it suffered during the festive season amid a competitive market and as shoppers remained “highly price-conscious”.

Founder and chief executive Mark Smithson said he is “personally frustrated” that, despite record peak trading, the firm was unable to boost its profit margins as prices came under pressure.

Shares in the group plunged by more than 27% in Wednesday trading as it said the hit is now expected to see annual underlying earnings fall to between £5 million and £6 million.

This would mark a steep drop from the £7.5 million underlying earnings it notched up in 2022.

But full-year revenues are expected to rise to between £115 million and £118 million, up from £97.8 million in 2022, with the group having seen sales jump 17.8% in its third quarter to December 31.

Whilst I am personally frustrated about our expected margin progression in the second half, I remain confident about our long-term growth prospects

Mark Smithson, Marks Electrical

The group said: “In a challenging trading environment where consumers remain highly price-conscious, our gross product margin did not increase to the levels we expected and, despite proactive action on other controllable costs, the impact of this in the peak trading period has had a material impact on our full-year profit guidance.”

It said sales for the first nine months of the year so far were 22% higher at £88.9 million.

The chain added that revenue growth is set to remain on track with expectations, but said it remains “cautious on the speed of recovery in consumer buying patterns, which we expect to temporarily impact the recovery of our gross product margin”.

Mr Smithson said: “Whilst I am personally frustrated about our expected margin progression in the second half, I remain confident about our long-term growth prospects and continue to be impressed by our ability to deliver market share gains profitably, against a fiercely competitive backdrop.

“As we work tirelessly as a team to enhance our gross product margin in the remaining months of 2023-24 and into 2024-25, I also know from 37 years of trading that margin fluctuations are inevitable.”

Mr Smithson founded the firm in Leicester in 1987 and has built the group up into an online electricals specialist offering some 4,500 products from more than 50 brands.