DFS swings to profit as sales surge but disruption lies ahead

Sofa so good: DFS swings back to profit as sales surge by 50% but furniture seller warns of supply chain crunch disruption

  • DFS sees sales rocket and a switch to more than a third made online
  • Pre-tax profits leapt to £99.2m – considerably ahead of 2019’s £55.6m
  • But furniture retailer says sales could be held back by supply chain problems 

Sofa seller DFS revealed it has rebounded strongly from the Covid crash with sales soaring 49.6 per cent year-on-year to £1.1billion.

DFS recorded pre-tax profits of £99.2 million in the year to the end of June, recovering from losses of £81.2million a year earlier.

That was also considerably ahead of pre-tax profits of £55.6million in the same period in 2019, as DFS’s digital offering jumped from 18.6 per cent to 35.3 per cent of sales, thereby allowing for ‘resilient trading performance through lockdown periods’.

However, the firm highlighted concerns with widespread supply chain issues which may cause difficulties for the business in the weeks and months ahead. 

DFS was able to perform well during lockdown as digital sales jumped to 35.3% of revenues

DFS reported on Thursday that it had reduced balance sheet bank debt by almost 90 per cent to £19million.

It was able to reinstate its dividend, with a proposed final payment of 7.5p per share.

DFS said growth in new orders during the period was ‘significantly stronger’ than the revenue growth and was driven by ‘market share gains, pent-up demand from “lockdown one”, and a shift in consumer spending to the home’.

The firm said it continues to see ‘strong consumer demand’ for its next financial year with ‘the current order bank at a record high, providing further resilience’.

It said while it had improved its output and warehouse capacity, and resourcing levels, ‘it should be recognised that the short-term operational environment continues to be exceptionally uncertain and difficult, given well-reported logistics disruption, cost inflation pressures and unplanned Covid absences’.

‘We believe that we have the right plans in place to mitigate these impacts, underpinned by our scale, operating experience and long-standing relationships, and we are focused on delivering good customer service, protecting our colleagues and creating long-term value.’

Analysts at Peel Hunt said the ‘well-documented issues in the supply chain, be they the manufacturers, the port or in the lorries, are holding back the bottom line for now’, but added that their ‘enthusiasm for the company and the shares remains’ with a target price of 450p.

DFS shares are up 1.9 per cent this morning and are currently trading at 272.5p.

CEO Tim Stacey added: ‘Despite numerous operational challenges during the pandemic, I’m proud that we have remained focused on our strategic agenda to lead sofa retailing in the digital age and are on track to achieve the incremental £40m of profit benefits set out in 2018.

‘We also see further growth opportunities into the medium term derived from extending the reach of our retail brands and optimising our operating platforms.’

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