Sofa so good for ScS, says GlobalData

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Following today’s release of ScS figures for H1 FY2020/21; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers his view: “ScS has had a strong first half with gross sales increasing by 13.9% to £182.3m, as pent-up demand from last spring’s lockdown was released; orders for the nine weeks to 25 July 2020 increased by 92.2%. The upholstery specialist benefitted from customers investing in their homes, as shoppers transferred money which had been earmarked for foreign holidays and leisure activities to larger ticket items. For the overall period, like-for-like orders fell by 9.1%; this is due to the current lockdown impacting its final five weeks with orders being 12.4% up for the first 21 weeks. As with DFS, this topline growth has filtered through the rest of its financials, with operating profit £18.1m higher than last year and its cash position £30.3m higher.

“The lockdowns have caused more shoppers to transfer their spend online, with online orders nearly doubling during the period, which translated into sales growth of 81.3% for the half. This uplift was supported by ScS relaunching its website in July to make it easier for shoppers to browse products on mobile and tablet as well as launching web-exclusive products. The focus on mobile and tablet is the right move for ScS as GlobalData consumer research indicates that more customers in the final six months of 2020 said they bought upholstery on their phone or tablet compared to the same period in 2019. 

“ScS now offers the ability for consumers to apply for finance through the online order process and has launched MyScSLive in January, where customers are able to have video calls with members of staff in store to talk about purchases. This reflects similar offers from Furniture Village and DFS and will help it use employees to trade customers up to more premium items. The use of video calls has been extended to flooring as well with customers able to book appointments with surveyor teams to help measure a room. This is a strong move for ScS and will help overcome one of the key barriers to floorcoverings online: potential errors made by customers measuring a room.

“The challenge which ScS, and other furniture retailers, will face in early 2021 will be how these order books are once this current lockdown is over. As furniture retailers can still deliver and recognise the revenue from their order books on prior purchases at the start of 2021, topline performance should remain resilient. However, once these previous purchases have been fulfilled, retailers face the prospect of a severely depleted order book as the gains made in online will not be enough to counterbalance stores being closed. ScS has experienced this already with online orders up 157.5% for the first seven weeks of its second half but overall order uptake is down 87.2%. A second bounceback once stores reopen is highly likely as pent-up demand is released and shoppers visit stores to test products prior to purchase, but the lag between purchase and delivery, which has recently been exacerbated by the European foam shortage and disruption with shipping, means the benefit of this recovery will not be felt straight away.

“ScS is not at immediate risk as it is in a strong cash position, and the retailer will be able to recognise a greater proportion of the post-lockdown recovery as revenue in the 14 weeks between re-opening and the end of its financial year. However, along with other furniture retailers, ScS could face a challenging few weeks in the spring.”