Sofa firm out of the comfort zone
Dec 4 2007 by Andrew Mernin, The Journal
SOFA retailer ScS Upholstery yesterday warned that interim results would take a significant hit as nervous consumers shunned “big ticket” items.
The Sunderland-based group said like-for-like sales orders had dropped by 16% since the end of July amid tougher than expected trading conditions.
Consumers have been affected by higher interest rates and the squeeze in credit markets, according to the group.
ScS is launching an aggressive advertising campaign in a bid to up trading in the key Boxing Day and January sales periods. The company’s half-year trading period runs until January 26.
It is also reviewing costs across the business as it seeks to offset falling sales.
ScS said it was too early to predict whether full results would miss expectations, with some of its busiest trading seasons still to come.
The chain has suffered from depressed sales since the end of last year, with like-for-like sales down 7% and fewer customers accepting credit agreements.
It said in September that trading remained weak, but today revealed that conditions had since been “much more challenging than anticipated”.
ScS chairman Mike Browne said: “Not only are we up against strong comparables for this period, but the previous interest rate increases continue to affect consumers.
“When combined with the high profile collapse in the sub-prime debt markets and the resultant credit squeeze, we believe that consumer confidence has been severely hit with regard to big ticket purchases.”
A GfK/NOP survey last week found that consumers were clamping down on big purchases, such as sofas and furniture, with intentions regarding spending on big ticket items at the lowest level since 1995.
Shopper spending power has been dented by five interest rate rises since last August and tougher credit conditions as the tightening in wholesale money markets continues unabated.
ScS said that while it faced difficult times ahead, it believed it could “minimise the impact caused by the current challenges” with lower costs and a concerted marketing push.
It has also reviewed its distribution network to address problems seen last Christmas, shutting four warehouses and opening three more modern facilities.
ScS said it remained on track with its store opening programme and is set to launch five new outlets before next August to add to its existing 95-strong chain.
In the 10 months to last July, the Sunderland group saw profit drop to £6.6m, compared to £9m in the same period the previous year. Yesterday shares in the firm fell by 1.88p to 109.12p.
