Slowing demand dents DFS’ expectations  

Living room retailer DFS Furniture plc has reported a slowing in market-wide demand during its fourth quarter.

Ahead of its financial year end on 26 June 2022, DFS said that recent trading through to 27 March 2022 has seen double double-digit growth in the volume of orders taken across the Group relative to a FY19 pre-pandemic comparative period. 

This volume growth was achieved despite offsetting significant cost inflation through mitigation and retail price increases.

However, trading to 5 June 2022 has experienced a reduction in order volumes.

DFS said: “Moving into the fourth quarter the UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting a c. 2.1% reduction in transactions in April1 relative to pre-pandemic periods. We have seen a similar change in order volumes across our Group.

“This reduction in transaction volumes comes despite evidence of the Group maintaining its recent market share gains based on our proprietary data.

“While we have increased our weekly production and delivered revenues progressively over Half 2, to record levels in the fourth quarter, the ongoing Covid linked supply-chain disruption, combined with lower order intake since April has led to lower levels of production and deliveries relative to our previous expectations.”

DFS now expects sales to be around £1,150-1,160m and underlying profit before tax and brand amortisation of £57-£62m, which compares to pre-pandemic FY19 pro forma 52 week revenues of £996.2m and profit before tax of £50.2m.

The Group remains in a strong financial position with significant available headroom under its £215m bank facility.

As for its outlook for FY23, DFS added: “We now expect to close the financial year with an order bank that is elevated by c. £30m or c. 2.5% of annual revenues relative to pre-pandemic levels, which will provide some resilience going into our 2023 Financial Year.

“It is difficult to forecast consumer behaviour over the next twelve months, but should the trends observed in April and May continue across FY23, this would broadly balance the volume benefit from the elevated opening order bank.  Following the growth of the Group in volume terms relative to pre-pandemic levels, we also believe that we have the opportunity to drive further cost efficiencies from our scale.

“However, our trading history shows that the Group has gained market share during periods of furniture market decline, and we believe that we will remain well-positioned against the market, given our scale, brand strength and our integrated retail strategy.”

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