ScS profits slide as store closures impact sales

The furniture retailer saw a 20% slide in profits to £120m in the full year to July 25, after it was forced to close its bricks-and-mortar stores and cease delivery of orders when the UK went into lockdown.

ScS also reported a 20% decrease in sales to £268m as online orders failed to make up for the lost store sales over the period.

Order intake, however, was only down 5.9% compared with the previous year, as the retailer saw an increase in orders and conversion rates when operations started up again in May.

The group has also invested in its online offering, launching a new website on July 26 that it hopes will help to drive online sales in the future.

During the lockdown period, ScS saw online sales jump 14% to £19m.

Chief financial officer Chris Muir believes the retailer’s online offering will complement its in-store sales rather than cannibalising them.

He said: “The new website is a really solid foundation for the growth of online.

“One of the things that is particularly interesting is that in April and May we weren’t sure whether the customers who would traditionally go to a store to shop would turn to online. The reality is that the average order value didn’t particularly move in those months – those customers still wanted to go into a store, which was one of the reasons we saw that pent-up demand in June and July.

“That really gives us the confidence that we can grow our online business and not cannibalise the store business.”

In the nine weeks since July 25, ScS has seen order intake up 46% on a like-for-like basis.

While the retailer is currently enjoying the benefits of pent-up consumer demand, it remains cautious due to factors like the furlough scheme coming to an end in October, which may in turn have an impact on discretionary spending.

In a statement, chief executive David Knight said: “We are delighted with the strong trading since the start of the new financial year. However, we are now entering our key autumn trading period and it remains difficult to predict the potential impact of the increased economic uncertainty, including the cessation of the government’s coronavirus job retention scheme at the end of October.

“Despite the uncertainty, our value-led proposition is underpinned by a strong balance sheet,and our clear offering has continued to prove successful. We are confident it will continue to appeal to our customers who want to buy great products at the lowest possible price.”