ScS continues expansion drive despite hit to profits

Aggressive expansion remains on ScS Upholstery's agenda, despite the retailer missing analysts' expectations due to the cost of last year's opening programme.

Record preliminary pre-tax profits of£9.8 million were up by 27 per cent, but analysts had hoped for£10 million or more. ScS opened 14 new shops during the year - four more than had originally been planned. Chief executive David Knight estimated that it costs£500,000 to open each store.

He put the group's success down to a combination of products, offer, staff and store location. 'You need all those ingredients to make the cake rise. Miss one out and you end up with a pancake,' he said.

Knight also pointed to the success of ScS's mezzanine floors, which help stores realise approximately 1,200 sq m of space from a 930 sq m footprint.

ScS plans up to eight new stores in the coming year with an Orpington outlet opening on Boxing Day and the first Welsh store, in Cardiff, likely to open by the Easter weekend. The retailer is also looking for a location in Scotland.

Overall sales rose by 35 per cent to£97.8 million. Gross margin declined year-on-year from 48.2 per cent to 48 per cent and operating margins were 9.8 per cent, down from 10.3 per cent last year.

Broker Numis said: 'Although the like-for-like performance (up 2 per cent) is slightly disappointing, growth at ScS is primarily being driven by the roll-out of new space.'