The Entertainer's owner has reported record annual sales of £315 million, but pre-tax losses widened to £19 million as higher employment costs and business rates ate into the toy retailer's profits.

Teal Group, the employee-owned parent of The Entertainer, Early Learning Centre and Addo Play, published its accounts for the year to 31 January 2026. Sales rose 10 per cent from £286.6 million the previous year, while pre-tax losses increased from £10.1 million.

Costs rose faster than sales

Operating losses doubled to £16.8 million and adjusted earnings before interest, tax, depreciation and amortisation stood at £2.9 million. The group blamed significantly higher employment costs, its exposure to business rate increases, depreciation and exceptional charges, including the cost of moving to employee ownership.

It also spent £5.4 million in one-off costs establishing its largest retail partnership. The board estimated that earnings would have been £7.7 million if the operating model changes made during the year had applied throughout it.

Group chief executive Andrew Murphy said: "Last year was a story of two parts. We grew sales to a record level and above the market, but significantly elevated employment costs, our high level of exposure to business rates increases and one-off costs related to our rapid expansion meant that profits moved in the opposite direction."

A new chapter under employee ownership

The year marked a turning point for the business. In September 2025, founders Gary and Catherine Grant transferred 100 per cent of the family's ownership to an employee ownership trust, handing the chain to its staff after 44 years in charge.

Becoming employee-owned allowed the retailer to lift long-standing trading restrictions. Its stores now open seven days a week, after decades of closing on Sundays, and its ranges now include popular franchises that were previously not stocked, including Pokémon and Harry Potter.

The changes appear to be paying off. In the first half of the current financial year, like-for-like sales in The Entertainer's own stores rose 22 per cent, with sales across all channels up 13 per cent.

Investment in prices and new stores

Teal Group said it invested £5 million in lower prices during the year and has restructured the business to remove £10 million from operating costs from 2027/28. Several store openings are planned for 2027, including at least three in the UK's top 20 retail locations.

The group employs more than 2,200 people and operates around 160 stores, alongside more than 1,000 concessions inside retailers including Tesco and Marks & Spencer. It also trades online through TheToyShop.com.

The board said it expected profitability to improve significantly this year, with trading strengthening after the year end. Toy sales across Britain grew for the first time since the pandemic last year, and the group said its record first-half sales showed the impact of the strategic changes made under employee ownership.