UK furniture group warns of profits weakness

UK furniture retailer ScS Upholstery warned today that tough trading conditions had been compounded by problems at a regional distribution operation.

UK furniture retailer ScS Upholstery warned today that tough trading conditions had been compounded by problems at a regional distribution operation.

The Sunderland-based group, which uses ex-EastEnders star Martin Kemp for its advertising, said its like-for-like order intake for the first 18 weeks of its financial year showed an 8% fall, compared with 7% seen in November.

It said the order weakness would have a “significant impact” on sales, resulting in weaker than expected profits for its financial year. It is working to a shortened accounting period of ten months to July 31 because of a change to its reporting calendar.

House broker KBC Peel Hunt cut its forecast for profits in the ten months to £9.7m (€14.5m), from £11.5m (€17.2m) previously. Shares were 18% lower today.

Investors were also given guidance about logistics problems, which affected pre-Christmas deliveries from its recently-expanded southern distribution centres.

It will prevent any recurrence of the difficulties by extending delivery times during the forthcoming March peak period. It will also bring forward the scheduled opening of two new distribution centres, in Wales and the Home Counties, to support the southern regions.

As a result of longer delivery times, ScS said around £2m (€2.9m) of sales would be deferred beyond the interim results stage and into the four months to the end of July.

ScS added: “Current trading conditions remain tough. However, our business model remains extremely sound with continued strong cash flow generation.”

It added that its store opening programme remained on track with three new stores opened so far this year and a further six planned before the end of the 10 month period. It had 88 sites at the end of its last financial year.

Richard Ratner, research analyst at Seymour Pierce stockbrokers, said ScS remained a good quality operation.

He added: “We have been concerned for some time that furniture has been trading with more difficulty than the market had been expecting. Only last week we downgraded our recommendation on ScS to ”underperform“, suggesting that profit estimates would be coming down.”

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