ScS sales update gloomy – but profit hopes stay

Mar 27 2008 by Andrew Mernin, The Journal

SOFA retailer ScS Upholstery delivered another gloomy sales update, but said it was still hopeful of returning to profit later this year.

The Sunderland-based retailer said like-for-like sales orders between the end of January and March 15 were 15% down, the same as the first six months of its financial year.

Sales over Easter were “well ahead” of last year, the group added, but this was against weak 2007 comparatives when warm April weather kept shoppers away from stores.

Unveiling an £8.8m trading loss for the first half to January 26, chairman Mike Browne said he expected the chain to return to profitability in the second six months as the benefits of a cost-cutting programme were realised. It has seen ScS scrap an interim dividend as well as four new stores and a wider refurbishment programme. ScS currently has 95 outlets.

Mr Browne said: “This has been an extremely challenging trading period and we are under no illusions about the economic trading environment.

“Whilst we remain confident of a profitable second half, we will continue to manage the business on the basis that we are unlikely to see any upturn in economic conditions for some time.”

ScS reported a 13% fall in total turnover for the six months to January 26, to £91.8m.

Last year saw the retailer post a 7% drop in like for like sales, with pre-tax profits also slumping to £7m from £17.2m.

ScS said no improvement in trading conditions was assumed for this year’s full year outlook, citing the impact of “ongoing economic pressure”.

But directors added they hoped to see some second half benefit from a five-week advertising campaign that ran from Boxing Day.

Broker Panmure Gordon said it was downgrading its full-year pre-tax profits forecast for ScS from £1.6m to nil.

Analyst Christian Koefoed-Nielsen said: “Given the scale and length of the weak trading ScS has been facing there continue to be clear risks that estimates will be downgraded further as the year continues.”

Gary Fawcett, assistant director at Brewin Dolphin in Newcastle, said: “The credit squeeze coupled with a deterioration in consumer confidence and a weaker housing market have taken their toll on ScS during the first half of its financial year.

“Big ticket items have been moved to the bottom of consumer shopping lists resulting in a 15% fall in like for like sales. However, the company’s confidence of a profitable second half helped to lift the shares on a day when the market as a whole was in the red.”

Log on to nebusiness.co.uk/news for a look back at ScS Upholstery’s descent into troubled times.

PAGE TWO: A look back at SCS Upholstery's descent into troubled times.