sofa-com-polandCommentary: Sofa.com’s pre-tax margin climbed 390 basis points to 13 per cent in 2013–14 and the retailer can do even better having invested in its Eastern European factory.

Sales at the London headquartered retailer — whose ecommerce business is slowly being augmented with retail showrooms in selected locations — were up 23 per cent to £21.8m with pre-tax profits rising 76 per cent to £2.8m.

It could be argued the real profit figure is even higher, given one of the company’s annual outgoings is a £505k royalty payment to directors for the use of the Sofa.com domain.

Royalty payments or not, it’s clear Sofa.com is doing well, still growing, and showing that ecommerce success doesn’t have to be a story of jam tomorrow and endless funding rounds.

Few in the industry begrudge Sofa.com its success. It is not a company taking money out of the market by selling cheap only to disappear in the not-too-distant future. It has the hallmarks of a long term, sustainable business.

Control of its own supply chain helps in this regard. Sofa.com is a longtime proponent of Eastern European
manufacturing — having sourced from Poland almost since day one.

That appears to have stepped up in the period since the year end. Its just filed year to end February accounts show it subscribed for 90 per cent of the shares in new Polish company Zaparoh during the year.

In the period since, Zaparoh — a Polish sofa factory — announced plans in the spring to move into a large 121,000sqft facility a few miles south of Poznań.

The keys were handed over in September, with Zaparoh expected to employ the best part of 200 people on site across a building taking in around 47,000sqft of production space, 67,000sqft of warehousing and storage with the remainder devoted to offices.

The factory and DC gives Sofa.com further infrastructure to expand globally — with the firm already selling into international markets including the US and the Netherlands.

Control over design and supply also provides a degree of protection, particularly from price competition. This is among the reasons Sofa.com is able to generate gross margins north of 55 per cent — a class leading metric that has given rise to a hugely profitable business.

It has been widely reported that Sofa.com is for sale. Stories of Sofa.com appointing advisors to explore sale options go back to late 2013 — before the sad and untimely death of Pat Reeves, one of Sofa.com’s talented co-founders, in January this year.

Whether the business goes on to be sold remains to be seen, but what is not in doubt is that — in the space of less than a decade — the brand has become of Europe’s most important and directional upholstery businesses.

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