DFS reports strong growth but warns of economic headwinds

The Doncaster-based firm said sales rose in its first half and it is well positioned to weather any potential dip in consumer confidence.

DFS said gross sales rose 7 per cent in the 26 weeks to January 28 and reported an encouraging contribution from its Dwell and Sofa Workshop brands.

In a trading update the firm said: "We recognise that in 2017 the retailing of furniture in the UK faces an increased risk of a market slowdown given the uncertain outlook for consumer confidence.

"However, with its resilient operating model we believe the group remains very well positioned to respond to economic headwinds and cost pressures whilst achieving continued growth in its share of the UK retail furniture market."

The group said it is working to mitigate the impact of the weak pound by negotiating better deals with suppliers.

"As we anticipated at the time of our preliminary results announcement in October, we saw some impact on product margins in the first half from the impact of adverse foreign exchange movements," the group told the market.

"We continue our work to actively offset this impact through range management and supplier negotiations, while the differentiated DFS sourcing model of vertical integration, UK manufacturing capability and superior scale remains an important competitive advantage."

The collapse in the value of the pound following the Brexit vote has ramped up costs for British businesses and started to impact profit margins.

DFS said its expectations for full-year pre-tax profit remain unchanged.

"Overall we believe DFS enjoys excellent prospects to deliver long-term profitable growth, strong cash generation and a progressive dividend policy as one of the UK’s best-known brands, a major British manufacturer and the country’s leading retailer of upholstered furniture," the firm said.