Upholstered furniture-to-floorings retailer ScS (SCS) slumps 24% to 166.5p as it posts a profit warning a matter of months after its stockmarket return (28 Jan '15). The self-styled 'Sofa Carpet Specialist' says full-year earnings will disappoint following a dramatic sales slowdown over recent bank holiday weekends.
Today's update from Sunderland-headquartered ScS, a dog of an investment in its previous guise as a plc, is undoubtedly a setback for the company and investors alike. The £82 million cap blames the sunniest April since 1929 and consumer nervousness ahead of today's General Election for a 15.9% like-for-like sales decline over the 4 weeks to 2 May, a slowdown during a key seasonal trading period.
Like-for-likes were actually 7.6% ahead over the opening 10 weeks of the second half year, yet sales collapsed post Easter, beginning with a poor Easter Monday that continued over the first May bank holiday. Amid warmer weather and uncertainty ahead of election polling, footfall declined and shoppers also traded down to lower priced products and put off big ticket purchases. This triggered a wave of discounting across the furniture industry, exerting downwards pressure on margins.
ScS, which expects trading to revert to more normal levels, is now guiding towards earnings before interest, taxation, depreciation and amortisation (EBITDA) of £11 million-to-£12 million for the year to 25 July. This prompts Investec Securities to swipe 24% from its EBITDA forecast, lowered from £14.5 million to £11 million.
The good news for shareholders is ScS, which operates furniture and carpet concessions in House of Fraser stores under the For Living brand, reiterates its commitment to pay a £5.6 million (14p per share) dividend, equivalent to an 8.4% yield at today's beaten-down share price. Sticking with its 'buy' rating, Investec has nonetheless downgraded its July 2016 dividend forecast from 14.9p to 14p and its published price target from 270p to 200p.