A Century of Resilience and Adaptation - ScS Positive Trading Updates and Remarkable Growth
After the end of two Bank Holidays in May, ScS (Sofa Carpet Specialists) issued another trading update that showed a positive growth in sales. In the update, the company reported a 14.6 percent order intake in LFL sales for 45 weeks up to June 4th 2016. This means the group is expecting to give positive profit reports ahead of their immediate market expectations that have been upgraded significantly in 2016. According to the company, the trading exceeded their initial expectations as the growth continued to indicate an excellent progress in virtually all categories of retail. By 2016 January, ScS had indicated their order intake had gone up by 8.8 percent for 25 weeks up to January 16th 2016; order intake went up 12 percent by April 2016 in the year’s initial 37 weeks.
A century of buoyancy
ScS trading history goes back to the 1890s in Sunderland, then family owned and operating as a general store for home furnishings. By 1980s, the Group had eight stores in operation mostly across England's North East under the Sofa Carpet Specialists name. The company at the time specialised in upholstered furniture. In 1993, ScS had a management buyout and the business expanded significantly, going beyond the North East into the entire UK. The focus was establishing it as the main upholstered UK furniture retailer within modern larger stores in retail park areas out of town.
In 1997 ScS pursued more growth and listed on London Stock Exchange and had a presence across the UK with 12 stores and about three main centres of distribution. As a result ScS growth was swift and by 2007 the group had grown its estate into 95 stores with 9 centres of distribution supporting them. At the time the company oversaw lots of operational initiatives from IT and management information upgrades to business processes.
The 2007/2008 December downturn did affect the company as partners such as credit insurance pulled out leaving the company in need of long and immediate cash. This led to a takeover of ScS in July of 2008 by Sun Capital. The entry of the new owner saw Sofa Carpet Specialists implementing new strategies with the aim of enlarging the customer base and limiting its fixed costs. It had further growth in mind at a time when the economic conditions hadn’t really improved.
Refined ScS Online shopping
After 100 years of existence, it was clear ScS resilience and adaptation strategy had kept it alive for decades. Towards its growth and adaptation strategy in a changing world ScS launched a new website in 2014 with the aim of providing an improved web shopping experience for all customers. The new website brought in an increased functionality, which offers customers a unique digital experience through the highest quality imagery, rich content and smooth navigation. Customers are able to easily find the furniture they need in a couple of clicks. The idea was to offer a unique user-friendly website that would seamlessly mesh a customer focused online and offline world.
The enhanced online experience was expected to have an effect on the sales and performance of the company. In the interim results of the first 26 weeks up to January 23rd 2016, reported order intake total sales increased by 9.1 percent. Gross sales also shot up by 10.2 percent to around £145.4 million in contrast with £132 million in the first half of 2015. ScS gross profit also increased by 13 percent to £64.8 million in comparison with 2015's first half of £57.3 million.
Increase in the gross margin shot up by 44.6 percent from 43.4 percent in the first half of 2015. Operating loss stood at £3.4 million, a better improvement to 2015's first half operating loss of £5.3 million. Flow of cash from the operating activities of the company was strong at £17.3 million in comparison with £11.9 million of the first half of 2015.
ScS enhanced online presence and increased sales since 2014 has seen the company enhance its sales position but that’s not all. The number of the Group's stores expanded to 97 after the Bromborough store opened on the Wirral by December 2015. By the end of summer 2016, the company expects to open two new stores in Plymouth and Aberdeen and another by Boxing Day of 2016 in Thanet.
After the ScS e-platform was developed, the company registered an increase in online gross sales by 17.3 percent to a tune of £4.3 million in contrast with £3.7 million in the first half of 2015.
The furniture company's growth prospects look strong due to its continued growth. The growth is boosted by the Group's concession agreement that exist with the House of Fraser to offer concession ranges on carpet and upholstered furniture in Fraser’s brand ‘For Living’ since 2014, as well as the ever improving online offerings and flooring propositions. The concession continues to work from House of Fraser's 30 stores spread across the United Kingdom.
ScS continues to identify new opportunities to open stores to maximise growth in its targeted areas. Strong bank facilities commitment and dynamics of cash flow have emphasized the furniture franchise's strong financial position. This supports its future growth ambitions while delivering a lot of value to the Group‘s shareholders. In fact, the confidence the company has was reflected in the Board's declaration of an interim dividend on 12th April, 2016 of 4.67p for each share.
Sofa Carpet Specialist remains one of the largest flooring and sofas retailers in the UK. Its number of stores has increased to about a hundred across the United Kingdom together with a robust and strong online offering via its website. ScS continues to specialise in both leather and fabric sofas apart from selling a unique branded range of products under specific registered trademarks such as SiSi Italia and Endurance, as well as provision of third party range of products like Parker Knoll, G Plan and La-Z-Boy. The group introduced its flooring venture in 2012 where the focus was on vinyl and laminate flooring as well as carpets.