DFS stays bullish ahead of new lockdown restrictions

Sofa giant DFS Furniture said manufacturing and deliveries will continue throughout the new national lockdowns which start today although all physical showrooms in England, Ireland and Wales, will be temporarily closed for four weeks.
People are spending more money on home improvements during lockdownPeople are spending more money on home improvements during lockdown
People are spending more money on home improvements during lockdown

The Doncaster-based firm said this means that 181 of its 208 showrooms will be shut for four weeks following the new Government legislation. All showrooms in other territories will stay open.

The group said the new lockdown measures being put in place by Governments to restrict the spread of Covid‐19 are not expected to materially impact profits in the first half.

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Under current legislation, 169 showrooms in England will be closed for four weeks from November 5 to December 2.

The firm's seven Welsh showrooms are due to reopen on Monday, November 9, following 16 days of closure.

Its five Irish showrooms are due to reopen on December 1, following six weeks of closure.

The DFS websites will stay open and the firm said they are performing well.

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The group said in a trading update: "Based on our previous experience of lockdown we expect our online business to improve further.

"This will be supported by the temporary transfer of showroom colleagues to other areas of the business, including remotely assisting customers with web purchases.

"Notwithstanding the showroom restrictions, we continue to manufacture, deliver and install orders safely into customer homes in all territories. Given the current very strong order bank levels, and the delivery lead times we are therefore operating at, we do not expect that this period of showroom closure will materially impact revenues and profitability for the first 26 weeks to December 27."

Since lockdown restrictions were introduced in March, people have chosen to spend their spare cash on improving their homes at a time when holidays and leisure pursuits were curtailed.

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DFS said its experience of prior lockdown periods indicates that nearly all of the orders that were disrupted were either deferred until showrooms reopened or were captured online.

The firm said its balance sheet position remains robust. With the strength of recent trading, helped by associated working capital inflows, it currently holds a net cash position, with access to over £300m of available cash and undrawn bank facilities.

Analyst Greg Lawless at Shore Capital said: "The statement is reassuring on a number of levels and highlights the actions taken by management in lockdown 1.0.

"The business is in a better shape than in March and retail sales can continue despite the temporary closure of showrooms. The investment case remains on DFS where it has both self-help levers and can leverage its market leading position with capacity coming out of the wider furniture market.

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"We also highlight that with consumers spending more time working from home in lockdown 2.0, then the home and potential spending on home furnishings could again peak."

The next scheduled trading update is on January 12, covering trading performance over the 26 weeks to December 27.

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