DFS Furniture reports slowing market-wide demand in the fourth quarter

DFS Furniture today said that the third quarter of its financial year saw double digit growth in the volume of orders taken across the group, when compared with the relevant pre-pandemic period.

DFS said this volume growth was achieved despite the company having to offset significant cost inflation through mitigation and retail price increases.

The statement added: "Moving into the fourth quarter the UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting a c. 2.1% reduction in transactions in April1 relative to pre-pandemic periods. We have seen a similar change in order volumes across our group."

"This reduction in transaction volumes comes despite evidence of the group maintaining its recent market share gains based on our proprietary data.

"While we have increased our weekly production and delivered revenues progressively over Half 2, to record levels in the fourth quarter, the ongoing Covid linked supply-chain disruption, combined with lower order intake since April has led to lower levels of production and deliveries relative to our previous expectations."

It continued: "Subject to any variations in the rate of deliveries of the final weeks, we now expect UK & ROI full year revenues of approximately £1,150-1,160m and underlying profit before tax and brand amortisation of £57-£62m, which compares to pre-pandemic FY19 pro forma 52 week revenues of £996.2m and profit before tax of £50.2m."

"Following payment of the recent £25m special dividend and the ongoing share repurchases, we expect to close the year with a net bank debt position of less than £100m, in line with the upper end of our 0.5x-1.0x target leverage range. The group remains in a strong financial position with significant available headroom under our £215m bank facility.

Commenting on outlook, DFS said: "It is difficult to forecast consumer behaviour over the next twelve months, but should the trends observed in April and May continue across FY23, this would broadly balance the volume benefit from the elevated opening order bank. Following the growth of the group in volume terms relative to pre-pandemic levels, we also believe that we have the opportunity to drive further cost efficiencies from our scale.

"However, our trading history shows that the group has gained market share during periods of furniture market decline, and we believe that we will remain well-positioned against the market, given our scale, brand strength and our integrated retail strategy."