Value sofas-to-carpets purveyor ScS (SCS) rallied 14.7% to 146.75p on Tuesday after the retailer updated the market on its coronavirus unlocking plans and provided a positive liquidity update that suggested it will be among the British furniture retailing trade’s survivors.
ScS joined in a wider sector rally triggered by Boris Johnson’s announcement that all non-essential shops can open from 15 June, with the aspiration for the gradual further unlocking of the retail trade in forthcoming weeks in England, as long as COVID-19 crisis metrics continue to improve.
SCS’ SOFT REOPENING
The upholstered furniture and flooring seller shuttered its brick and mortar stores and closed its distribution network as the country entered coronavirus lockdown in March.
However, while ‘non-essential’ retailers won’t be reopening until 15 June, the sofa and carpet retailer counts as a homewares retailer and after careful consideration of updated Government guidelines, it soft reopened (23 May) 80 of its stores in England ahead of the Bank Holiday weekend.
ScS also reopened its distribution network, allowing deliveries to customers to recommence. But in line with government guidance, its 19 stores and distribution networks in Wales and Scotland remain closed for the time being.
FURNITURE SURVIVOR
Following lockdown, the self-styled ‘Sofa Carpet Specialist’ took decisive action to cut costs and conserve cash, including suspending the interim dividend. On 17 March, ScS drew down £12m from its revolving credit facility (RCF).
Including the £12m RCF, as at 25 May it held £48.3m in cash and management today reiterated that ScS is ‘a resilient business, with a strong balance sheet, coupled with a flexible cost base, and is well positioned to navigate this event and return to growth when the economy recovers.’
The coronavirus pandemic has caused the company considerable cash burn, yet Shore Capital stressed that ScS ‘remains highly liquid, solvent and to us a survivor in the British furniture retailing trade.’
The broker continued: ‘Sadly, we do not believe that all of the furniture and flooring stores trading stores in the UK prior to the coronavirus crisis will re-open, something that in a broader context leads us to have concerns about the short-to-medium term prospects for the British consumer economy.
‘Whilst this is so, ScS, with its excellent management, long-standing financial conservatism, strong balance sheet and operational effectiveness, was always towards the top of our survivors’ list for the post-lockdown domestic retail world.’
