Shares in value sofas-to-carpets seller ScS (SCS) surged 13% higher to 327p on a surprise update in which the retailer said trading since reopening its stores had been very strong.

ScS now expects results for the year to July 2021 will beat market expectations, insists the outlook for full year 2022 is ‘substantially’ better than current market forecasts and, given a strong balance sheet and management’s confidence in the business, has also reinstated the dividend.

REOPENING BOOM

Shares outlined ScS’ attractions as a reopening play in our cover story in May and the retailer has indeed seen a big improvement in trading since pulling up the shutters and flinging open its doors in April.

Consumers that have saved up cash during the pandemic through reduced outgoings on things like commuting and socialising are unleashing pent-up demand, while the vaccine rollout is giving them the confidence to venture out to brick and mortar stores.

From 4 April 2021 to 12 June, order intake grew by a bumper 371% year-on-year. Admittedly, this leap reflected last year’s period of store closures at the height of the pandemic, but orders were up 79% on the comparable pre-Covid period in 2019.

DIVIDENDS REINTRODUCED

Given ScS’ encouraging trading performance and management’s growing confidence in the business going forward, the retailer has not only repaid £3 million of Coronavirus Job Retention Scheme (CJRS) grants, but it has also recommenced dividends starting with the delayed interim payout of 3p.

Today’s positive update from ScS coincided with the stock market debut of Made.com (MADE), the high-end designer furniture site popular with millennials, although its share were trading 5% below their 200p issue price at 190.1p in debut dealings.

As we outlined here, Made.com plans to capitalise on the online shift accelerated by the Covid crisis to gobble up share in a fragmented market, yet the company remains loss-making and this is a competitive industry where players include ScS, e-commerce giant Wayfair and also DFS Furniture (DFS) to name but a few.

THE EXPERTS’ VIEW

Describing ScS as ‘a superbly operated business’, Shore Capital has upgraded its 2021 pre-tax profit estimate by more than 20% to £14 million, a figure which includes £10 million of business rates relief, and has upped its 2022 forecast by around 150% to £13.7 million.

Russ Mould, investment director at AJ Bell, commented: ‘Given ScS sells flooring too, it is likely benefiting from the wider push to refresh interiors as people have been forced to confront their fraying or worn carpets and stained kitchen and bathroom lino.

‘The scale of the improvement may still have caught some off guard though and that is reflected in the shares pushing to fresh all-time highs as analysts hastily upgrade forecasts. ScS also deserves credit for its ability to meet this surge in demand, particularly at a time when there is a shortage of some raw materials.

‘ScS needs to be prepared for fluctuations in demand as pent-up demand eases and with the economic outlook and recovery from Covid still fairly uncertain. The company at least has the buffer of a strong balance sheet to fall back on.’

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Issue Date: 16 Jun 2021