DFS reports ‘improved performance’ but H2 a worry

Doncaster-based DFS Furniture plc published a trading update for the 26-week financial reporting period to December 29, 2024, together with an update on recent trading.

DFS reported “improved performance driven by market share gains, lower operating costs and gross margin improvement.”

The firm said first-half underlying profit before tax and brand amortisation is expected to be £16 million to £17 million, up £7 million to £8 million year on year.

“Group order intake up +10.1% YoY notwithstanding a weak market backdrop, supported by successful implementation of growth initiatives and higher than expected market share gains for both brands, with Sofology’s improved order intake growth trajectory continuing +19.1% YoY …” said the firm. 

Gross delivered sales expected to be up +1.4% YoY, with order bank closing higher YoY, driven by continued Red Sea shipping delays and order intake strengthening through the period …

“Profit increase driven by the higher sales, operating cost savings and gross margin improvement more than offsetting current inflationary increases …

“Net bank debt at the end of the period down to £117m with leverage3 improving to 1.7x compared to 2.5x at previous financial year end …

“The important Winter Sale trading period has started in line with our expectations.”

In its outlook, DFS said: “The Group continues to expect full year growth in profits and cash flow with FY25 PBT expected to be in-line with current consensus …”

However, DFS said its profit delivery is now expected to be weighted to the first half driven by a cautious view on market demand in H2 based on UK economic performance post budget, gains from competitor disruption in H1 expected to partially reverse in H2, and an increase in operational costs in H2 due to the rises in national insurance contributions, the national living wage and higher than anticipated interest rates.

DFS CEO Tim Stacey said: “While the market remains relatively subdued, we are continuing to deliver on our self help initiatives having strengthened our position as the clear market leader, improved our gross margin and reduced our operating costs, all of which have helped us to deliver year on year profit growth.

“We remain focused on executing our plan, and are cautiously optimistic despite the increased inflationary pressures and less positive market outlook for 2025. Looking forward, we are confident that the Group is well positioned to drive attractive returns for shareholders as the market recovers and we remain focused on delivering our 8% PBT medium-term target.”