Sofa seller ScS says shoppers are putting off big-ticket buys as inflation bites
The furniture and flooring retailer said its revenues jumped by more than 8% in the year to July 30 but demand has begun to soften since.
Sofa seller ScS has reported record sales for the previous year but warned of a slowdown in demand in recent months as high inflation took a toll on consumers’ spending power.
The furniture and flooring retailer said its revenues jumped by more than 8% in the year to July 30, up from £305 million last year to £332 million.
It also saw an 8% boost in gross sales.
Its results were ahead of market expectations and “record” sales helped drive up its underlying pre-tax profits – which exclude one-off charges and business rates relief – by more than two thirds.
But the retailer said its strong performance has been dampened by subdued sales activity since the start of the new financial year as cost-of-living pressures took hold.
The sector is seeing softening demand as consumers defer spend on big ticket discretionary purchases
Steve Carson, ScS’s chief executive, said: “Trading since the start of the new financial year has been subdued, with the challenges of high inflation impacting consumers’ disposable income.
“As previously reported, the sector is seeing softening demand as consumers defer spend on big ticket discretionary purchases.”
Back in August, ScS said customer orders had already begun to fall as shoppers tightened their belts and put off big-ticket purchases.
Orders in the first 10 weeks of the new financial year, covering August and September, were down by almost 8% compared to the same period in 2018, the last full year before the pandemic struck, the firm said on Tuesday.
Furthermore, the retailer said it has been hit by a 14% increase in distribution costs this year, due to pressure to increase pay for its logistics staff coupled with surging fuel and property management costs.
Its pre-tax profits declined by more than £6 million in the latest financial year as sales growth failed to offset the group’s rising costs.
However, Mr Carson reassured shareholders that ScS is in a strong financial position to face the upcoming economic challengers and he is “confident in the longer-term growth prospects of the business”.
Investors reacted positively to ScS’s full-year results and its share price was up by nearly 2% on Tuesday.