Sofas-to-carpets seller ScS’ (SCS) shares cheapened 2.5p to 196p on Tuesday on the news its recovery has been brought to a shuddering halt by store closures mandated under fresh lockdowns.
However, this resilient retail operator has built a strong balance sheet and expects to reopen its stores on 3 December.
And given the robust trading it experienced following the first lockdown, broker Shore Capital believes its strong value-led proposition leaves the retailer ‘ideally placed to trade well by capturing any pent-up demand on reopening, maybe gaining market share too’.
SLOWDOWN IN MOMENTUM
Sunderland-headquartered ScS’ AGM trading statement for the 17 weeks to 21 November confirmed a slowdown in trading momentum from the exceptionally strong start to the year, which was driven by increased investment in UK homes and the release of pent-up demand.
The seller of keenly priced furniture and flooring reported order intake growth of 15% over the 17 weeks between 26 July and 21 November, including bumper 32% growth in the first 14 of those weeks.
Unsurprisingly, sales have dropped off precipitously in recent weeks due to temporary store closures mandated under the Welsh firebreak and England’s second lockdown, with order intake slumping 65.2% in the final three of these weeks.
‘Trading since the second lockdown commenced has been similar to that experienced during the initial lockdown, where, given the tactile nature of our products, the majority of customers waited until stores re-opened to try our product in person before making their purchasing decision,’ explained ScS, which expects to reopen its stores on 3 December.
Unlike the first national lockdown, and in line with government guidelines, the retailer’s distribution centres have remained operational and continue to deliver goods to customers.
CARSON COMES ON BOARD
Today’s other significant news was the appointment of seasoned retailer Steve Carson as ScS’ new CEO. He will lead the business following David Knight’s planned retirement next year. Carson, who started his career at Sainsbury’s (SBRY), was most recently Group Managing Director of Holland and Barrett.
Following today’s update, Shore Capital left its forecasts for the year to July 2021 unchanged, calling for pre-tax profits of £11.6 million and earnings per share of 23.5p, while retaining its ‘cautious’ full year 2022 expectation for pre-tax profits of £5.3 million and earnings per share of 10.7p.
