DFS gains market share despite weakening demand; sales forecast lowered

Living room and upholstered furniture retailer DFS has reported a slight decline in order intake but has made market share gains.

According to its latest trading update for the 26 week financial reporting period to 24 December 2023, group order intake fell -1.1% on last year.

DFS said that overall market demand has been “weaker than anticipated, down approximately -9% year on year in volume terms”.

“We believe this performance was particularly impacted by record hot weather in September and early October when footfall and demand proved to be especially weak. We have since seen demand recover and our profit guidance assumes market volumes are down -5% year on year through the remainder of the second half.

“Although we have not been immune to the market volatility and weaker demand, Group Order Intake for the period of -1.1% year on year was ahead of the market.

“Gross sales, recognised on delivery of orders to customers were down -5.6% / -£39m year on year. As expected, this was a greater decline than order intake as a result of the unwind of an elevated opening order bank at the start of the prior year resulting in a higher level of delivered sales in the comparator period.

“Despite the tougher than expected market conditions, we expect to report PBT for the first half slightly ahead of the prior year (FY23 £7.1m). This has been supported by improved operational performance, manufacturing & sourcing and cost to operate efficiency programmes. Our full year expectation for non underlying charges of £7m (with a £5m cash cost) remains in line with previous guidance.

“We have reduced our revenue guidance to reflect the weaker than expected demand. The impact of this reduction on PBT is expected to be offset by progress lowering our operating costs and our full year profit guidance remains unchanged at £30-35m PBT (FY23 £30.6m).”

DFS added that order intake for the winter sale campaign to date is consistent with its first half run rate.

Tim Stacey, Group Chief Executive, said: “The Group has performed well in tough trading conditions. Despite the weaker than expected market, good operational performance and progress on gross margins and lowering our cost base have enabled us to deliver a profit for the first half that is slightly ahead of the prior year and we remain on track to deliver our full year profit target.

“Looking forward, the Group has good growth prospects and is well positioned to drive attractive returns for shareholders, capitalising on market recovery as well as growing our Home offering and delivering our 8% PBT target.”

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