DFS reports strong recovery after lockdown ended

The Doncaster-based firm said it had been an “extraordinary” year, unprecedented in the challenges posed by the closure of its showrooms, manufacturing and delivery capabilities for almost three months of its peak spring trading period.

During this period, the majority of DFS colleagues were furloughed and the small team which remained, worked from home.

Tim Stacey, DFS’s chief executive, said: “While the reported decline in profit is undoubtedly disappointing in headline financial terms, a significant proportion of this profit has already been recovered in the current year as we resumed customer deliveries.

“The current year has started very strongly with all showrooms now open and our digital channels continuing to grow. We believe that this growth is due to a combination of pent up demand from lockdown, consumers spending relatively more on their homes and the strength of the DFS and Sofology propositions in particular.”

Mr Stacey said the group is well placed to strengthen its market-leading position in the medium term.

“The events of the past year have allowed us to build an even stronger sense of togetherness. We emerge from the crisis stronger and with renewed energy and purpose,” he added.

DFS said its revenue fell £272m to £725m in the year to June 28 as the group’s stores were shut during the peak spring season during the Covid-19 lockdown.

The group will not pay out a final dividend in order to maximise its balance sheet at a time of macroeconomic uncertainty.

The firm reported strong online orders since the lockdown was announced in March and said its showrooms have seen brisk trading since they reopened after the lockdown.

DFS said its year-on-year order intake growth over the last 12 weeks, combined its higher opening order book, implies £226m of additional revenues will be realised in this financial year.

Analyst Jonathan Pritchard at Peel Hunt said: “DFS has enjoyed another strong month of trading since the last update.

“Customers are continuing to trade up, a nod to the stronger ranges across the DFS group. It would be wrong to extrapolate current trends, but 2021 is likely to be a stand-out year. The resultant stronger balance sheet will allow a strategic acceleration (expect 10 new Sofologys this year). With market share being won anyway, the future is bright.

“The shares are too cheap for such a strong equity story featuring excellent cash generation.”

Analyst Greg Lawless at Shore Capital added: “DFS is highlighting that, notwithstanding the challenges, the board remains confident in the strength and resilience of the business and highlights its scale, vertical integration and financial strength to weather the months ahead.

“We note the positive tone and strong current trading despite the wider retail economic backdrop. In our view, this is an upbeat statement from DFS. We like the fact that the company can leverage its market leading position, vertical integration and has self help levers to grow the business.”