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ScS invests across channels – but supply chain delays mean lower sales and a pre-tax loss

Image courtesy of ScS

Supply chain issues and driver shortages means it is taking longer for ScS to deliver to customers, hitting first half sales and resulting in a pre-tax loss. But the sofa and carpets specialist says that once it fulfils the orders it has on its books, it will be on track to make a full-year profit. The company is continuing to invest in digital and in its stores.

The update comes as ScS today reports revenues of £145.9m in the 26 weeks to January 29 2022, down by 16.1% on last year. At the bottom line it reports a pre-tax loss of £3.6m, down from a pre-tax profit of £17.7m last time.

The fall in revenues and profits comes as international trade issues – and particularly the availability of shipping containers – combine with shortages of delivery drivers and supplier delays to mean that while the retailer’s orders are growing, there are delays in delivering the finished goods. Once those orders are fulfilled, says ScS, it will see growth in both sales and profits – and a full-year profit, in line with market expectations.

In the meantime, it has introduced order tracking functionality on its website, and a new quick delivery – in two weeks – range of two and three seater sofas for those customers who are looking for faster delivery times.

ScS says online orders are now 55.8% ahead of the same time two years earlier, and its order book of £148m is now double the size it was on January 25 2020.

Steve Carson, chief executive of ScS, says it is pleased with trading and with progress on its strategic growth plan.

“Like many retailers, supply chain disruption has impacted the group’s first half results,” he says. “Whilst this has been frustrating it has enabled the business to accumulate a strong order book and we are focused on delivering it through the second half of the year. We are progressing our strategic goals, whilst maintaining strong cost control and cash management.

“We are mindful of the ongoing impact of inflationary pressure on the group, its customers and suppliers. Whilst we have no suppliers who manufacture in Ukraine, Russia or Belarus, we are deeply saddened by the conflict.

“The board’s confidence in the future of the group is demonstrated by the 50% increase in the interim dividend and the commencement of a £7m share buyback programme. Financially the group remains strong, with good cash flows and a strong balance sheet. Given the group’s positive trading, we remain on track to meet full-year market expectations.”

Multichannel strategy

Over the first half of its year, the retailer has invested both online and in stores. It is working with a partner to design a concept store where new ideas can be tested, and is also using its stores to showcase its latest ranges and brands.

It is reviewing its store network to make sure its showrooms are in the best locations, and has relocated stores in Doncaster and Rotherham while closing its West Quay store in Southampton. It is also looking to open new stores in areas that it does not already cover.

ScS has also opened a digital hub in its new expanded Coventry store, while increasing the size of its digital team, and says the location means it gets real time feedback from both staff and customers. During the half-year it added product reviews functionality, and says that this will benefit customers when considering a purchase, while also enabling it to ensure its products meet customer expectations.

ScS is a Top250 retailer in RXUK Top500 research.

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