The Original Factory Shop is lowering prices and sharpening its in-store offer after profits slipped last year when it invested in the business.

The value department store retailer told Retail Week that it made EBITDA of £9.4m in the year to March 30, down from £13m the previous year.

Sales edged up 0.6% to £163m, a slow-down in growth against last year when turnover jumped 10.4%.

The retailer said its performance was impacted by investment made in overhauling its stock management system.

But The Original Factory Shop said it has had a “strong” start to the new financial year with like-for-likes up 7% in the first half.

The Original Factory Shop chief executive Tony Page said: “Over the past nine months of full-year 2014 we implemented a new stock management system - our largest IT and process modernisation programme to date. This, coupled with the continued building of a strong senior management team and a strategic repositioning, meant that it was an important year for the long-term growth of the business.

“Whilst these developments depressed our gross margins and EBITDA figures, effective cost control secured record level sales and strong cash generation.”

The 191-store retailer generated cash of £9.5m against £9.8m the year before.

Store-centric campaign

Page, who took the reins in July last year, has developed a new store-centric campaign, designed to put the customer at the heart of the offer.

Page is launching its new ‘love it more for less’ campaign in the run up to Christmas. It is lowering prices and refreshing its point of sale marketing in-store as it aims to attract more shoppers through its doors.

Page said he has introduced a ‘first price, sharp price’ initiative, to ensure customers are getting even better deals.

It has also introduced 25 new well-known brands, including beauty brand Sanctuary and dinnerware brand Denby, so customers receive genuine bargains, Page said.

The Original Factory Shop is also investing in its store estate. It aims to open another 10 shops this financial year, following nine openings last year, and it plans to quadruple its investment in modernising its store estate.

It is also trialling a number of different formats as it eyes expansion across the UK. This week the retailer will relaunch its Wrentham store in Suffolk, which will feature ‘department store’ type concessions, although Page declined to reveal which brands it will be hosting. It is also eyeing sites in larger towns. At present its stores are in towns of around 20,000 residents.

The new stock management system has improved product availability of its core ranges and reduced the amount of stock on the shopfloor. Page said this has opened up space so the retailer can visually merchandise stock for the first time.