Market share gains at DFS as profits drop

Doncaster-headquartered furniture retailer, DFS, says it has achieved a record market share position as it publishes its interim results for the 26-week period ended 25 December 2022.

Underlying profit before tax and brand amortisation was £7.1m, compared to £23.3m in the prior period. DFS says this reflects lower year-on-year gross sales and a net increase in operating costs due to inflationary pressures and investments to support future growth.

Reported profit before tax for the period was £6.8m (H1 FY21: £22.8m), while the business reported revenue from continuing operations of £544.5m, up 9.4% compared to the non-Covid disrupted FY19 period (down 2.2% on H1 FY22: £556.5m).

Tim Stacey, group chief executive officer said: “We expect our profit for the year to be between £30m-£35m in line with external expectations. The market share gains have gone some way to alleviating the impact of the weaker market we have observed in 2022 overall.

“Those gains built throughout the period with the group delivering strong order intake growth in the second quarter. The order intake momentum has continued through the important winter sale period.

“Profit margins have reduced over the last year due to a combination of significant cost increases and our commercial strategy to ensure we continued to offer great value for customers in an environment where consumer discretionary spend was under pressure.

“We have however improved our gross margins in the first half of this year from H2 of FY22 and further still in the second half to date through product innovation and selected retail price increases.”

DFS notes it has been operating in a tough macro economic environment which has led to the upholstery market declining in volume terms, estimated at -15%, and cost inflation running at double digit growth for the majority of 2022, compared to pre-pandemic levels.

DFS says it has developed robust plans and is currently implementing them to improve profitability.

The company adds that during the period it opened two more of its Sofology showrooms, with the brand now present in 57 locations as the business continues its national roll-out plan.

It says it remains confident it can achieve the financial performance aims announced at the DFS Capital Markets Day in March 2022, with a revenue target of £1.4bn.