Cost programme improves profit but half year sales down at DFS

Living room and upholstered furniture retailer DFS has reported a decline in half year sales while profit improves.

According to its interim results for the 26-week period ended 24 December 2023, total half year sales were down 5.6% to £666.2m from £705.6m against the same comparative period.

DFS sales were down 5.7% to £525.6m, while Sofology sales were also down 5.3% to £140.6m. Gross margin increased to 56% from 53.8%, while underlying pre-tax profit resulted at £8.7m, up 1.6% from £7.1m.

DFS said it has made ‘good progress’ on its Cost to Operate programme with margins improving, adding: “Despite a more challenging and volatile than expected upholstery market, with order volumes down c-10% year on year versus -5% assumed in formulating our profit guidance in September, the Group has continued its long track record of market share gains reaching a record level of 38.5% driven by the strength of our brands, scale and retail proposition.”

The retailer said that after a ‘solid start to January’, market demand has weakened significantly over the last two months, with market order volumes down c16% year on year across January and February (H1 -10%).

Due to this, DFS now expects full year revenues to be in the range of £1,000m-£1,015m and profit to be in the range of £20-25m, excluding risk of Red Sea delays which it continues to monitor closely. If the Red Sea issues continue through to the year end, potential delivery delays could result in up to £4m of profit being deferred into its following financial year

This represents a £60-£65m reduction in revenue guidance, partially mitigated to a £10m reduction in profit guidance, supported by ‘strong progress on costs and gross margins’.

Tim Stacey, Group Chief Executive Officer said: “I want to thank our colleagues for their dedication toward providing a first class service to our customers. Whilst the current macroeconomic situation has presented many challenges, we are pleased to have extended our market leadership while reporting a resilient profit performance through the first half.

“As a result of weaker market demand we have lowered our FY24 profit guidance to £20-£25m, excluding the potential risk of Red Sea delays which we continue to monitor closely. This reflects Revenue guidance reducing by £60-65m, partially mitigated by good progress on our Cost to Operate programme.

“We remain confident in both our long-term growth strategy and the capability to deliver on our objectives. We remain well positioned to improve our profit margins without market recovery and remain confident in delivering our 8% PBT target when the market recovers.”

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