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ScS reports falling full-year sales and pre-tax losses despite online lockdown growth

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ScS today said its online business grew fast when its 100 shops were forced to shut by coronavirus lockdown this spring. But while ecommerce sales grew by 78% in April and May alone, compared to the same time last year, that could not make up for the loss of in-store sales. The retailer today reported a 19.5% drop in full-year sales and a bottom-line loss. 

ScS closed all of its 100 shops and its distribution centres on March 23, when the government ordered the closure of non-essential retailers. At its peak, the retailer furloughed more than 1,400 members of staff – while giving extra holiday to those who carried on working – while cutting back on spending in areas from advertising to the dividend, and agreed to defer rents with landlords. 

Online sales, at the same time, rose by 78% over April and May until, on May 23, the group reopened its English shops with social distancing measures including an appointments system put in place. They were followed in June by those in Scotland and Wales. Distribution resumed gradually from May 19. In the nine weeks to July 25, orders grew by 92.2% as shoppers were keen to buy new sofas and carpets following lockdown. 

ScS reported revenue of £255.5m in the year to July 25 2020, down by 19.5% from £317.5m a year earlier. But the specialist in sofas and carpets said that orders fell by only 5.9% during the year, despite the 100 ScS shops being forced to close for two months. Online sales grew over the full year by 13.6% to £19.1m from £16.8m a year earlier, following investment in its ecommerce systems.

Pre-tax losses came in at £3.1m, after a shift to the new IFRS 16 accounting system, from a profit of £14.3m a year earlier. That includes a £3.4m write-down of the value of property, plant and equipment and leases as the retailer takes a cautious view of how its stores will perform long-term in a “potentially weakened economic environment”. 

In the first nine weeks of the new financial year – to September 26 – orders have grown by 45.8% on a like-for-like basis – that strips out the effect of store, and business, openings and closures.

David Knight, chief executive of ScS, 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.” Knight, who has worked at ScS for 32 years, plans to retire next summer. 

Multichannel investment

ScS has invested, through the year, in a new ecommerce platform which it says helps it to better present products including a new online exclusive range, improves mobile navigation and produces a “more engaging” checkout process. It now generates images of all its models in all available colours in-house for use across its new in-store sales app, the nYwhere app, its website and in-store displays.  “With online sales providing an ever-increasing proportion of our overall sales and a more important role than ever for our customers, we were excited to launch the new site and look forward to further enhancements that we can implement on our new mobile-optimised site,” said Knight. 

He said the Covid-19 outbreak had allowed it to take a step back and rethink how things are done, seen both through a new range of web-only products, and training for 30 staff to become mental health first aiders to support staff post-lockdown. 

ScS, ranked Top500 in RXUK Top500 research, sells online and from 100 UK shops. 

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