Furniture retailer ScS has started its FY2020/21 strongly with gross sales increasing by 13.9%, 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 that had been earmarked for foreign holidays and leisure activities to larger ticket items.
This momentum continued throughout the summer with purchase uptake increasing by 31.7% between August and October before the lockdown last November stifled demand.
Analysts also suggest that the depth of order decline in November’s lockdown was not as severe as the first spring lockdown as shoppers increasingly turn to online, with uptake down by around 65% since November, compared with 92.5% between March and May 2020.
Online orders nearly doubled in ScS’s first half as shoppers became more confident about making larger ticket purchases through this channel. This shift to digital during lockdown along with the release of pent-up demand has helped support ScS’s order book, which increased by 22.8% to be worth £90.5m inc. VAT as of 23 January.
Out-going ScS CEO David Knight, who retires in July to replaced by Steve Caron, says: “Whilst it is too early to provide clarity on the outlook for the weeks and months ahead, we remain cautiously optimistic given the strong trading experienced by the Group following the first and second lockdowns. Given the tactile nature of our products, the majority of customers chose to wait until stores re-opened to try our products in person before making their purchasing decision. This resulted in the business benefiting from pent-up demand, coupled with an increased level of investment by UK consumers in their homes. The Group has built a robust balance sheet and continues to focus on cost and cash management to ensure we maintain this resilience in these challenging times.”
Matthew Walton, Senior Retail Analyst at GlobalData, comments: “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.”
Walton continues: “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. Should there be another surge in demand post lockdown for furniture, the lag between purchase and delivery, which has recently been exacerbated by the European foam shortage, means the benefit of this recovery will not be felt straight away. “
He concludes: “ScS is not at immediate risk, as its resilient balance sheet makes it less at risk of a facing a cash crunch, but, along with other furniture retailers, could face a challenging few weeks in the spring.”
