Initial surge in orders post-lockdown is encouraging but ScS cannot rest on its laurels

Following today’s release of ScS FY figures for 2019/20,

Matthew Walton, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘ScS’ results have followed a similar pattern to DFS’ as a sharp decline in sales during its second half (-38.0%), due to the lockdown, caused overall delivered sales for FY2019/20 to fall £65m to £268m. However, orders during the final eight weeks of FY2019/20 grew by 92.2% versus last year as the pent up demand post-lockdown was released, enabling ScS to enter FY2020/21 with a strong order book. Based on figures given at its interim results, this uplift in orders equates to around £70m in sales, around £34m up on last year, with the majority set to be recognised during Q1 2020/21.

Initial investor sentiment has been very positive, with ScS’ share price peaking at +17.3% in early trading. Further to its enhanced order book entering FY2020/21 helping it gain share in the short term, its greater focus on value means it is well placed to capitalise on the difficulties being experienced at Harveys, which remains in administration, and Oak Furniture Land, which is set to close 27 stores.

ScS’ cash position has also improved with £82.3m available to it at the end of the year, an increase of £24.6m on last year and its highest level of cash over the past five years, aided by the uplift in orders to close out FY2019/20 and careful cost management during the lockdown. ScS’ reserves were such that it was able to repay the £12m it drew down from its revolving credit facility in March.

The main challenge that ScS, and other furniture specialists, now face is its performance once the stagger of this pent up demand has fully unwound. GlobalData’s UK Consumer Sentiment Tracker from July found that 32.5% of shoppers intend to spend less on furniture & floorcoverings over the next six months, declining on last month, as shoppers cut back in anticipation of a severe recession. ScS has delivered resilient results, and its greater cash reserves and focus on price and promotions will support it, but the market it emerges in once its current order book has been fulfilled will be much more challenging.”

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