DFS secures record market share of 38 per cent during 'challenging' trading period

The group said its underlying profit before tax and brand amortisation for the full year is in line with previous guidance at slightly above £30m despite the market being significantly worse than expected. DFS said its gross margin rate was continuing to improve, supported by freight costs returning to pre-pandemic levels and effective cost control.

The statement added: “Consumer demand continues to be impacted by the macroeconomic environment; market volumes are down by c.15 per cent to 20 per cent across FY23.”

"The group has a track record of growing market share in all trading environments. This has continued through FY23, with market share increasing to 38 per cent. Gross sales increased by 15 per cent compared to the comparative pre pandemic period (FY19), down 4 per cent year on year.”

Tim Stacey, the group chief executive, said: "I would like to take this opportunity to thank every one of our colleagues and partners for their commitment, hard work and dedication as we trade through the increasingly challenging market conditions.

“We are in the strongest position we have ever been as a group in terms of market share, and when the market recovers, we will be well placed to deliver our strategy and grow our earnings and cash flows towards our longer term plan.”

DFS added: “Trading at the start of the year has been consistent with the board's expectations. We currently expect market volumes to decline by mid-single digits for the full year, however, the economic outlook remains uncertain.

"To that end the business has been prudent in its planning, is taking actions to maximise operating cashflow through continuous margin improvement, delivering cost savings and reducing capital expenditure. “Despite the ongoing pressure on market volumes, we expect underlying profit in FY24 (full year 2024) to be slightly above FY23 (full year 2023) levels, supported by the group's leading brands, scale and well invested integrated retail proposition.”

Commenting on longer term market trends, DFS said: “When the market recovers, given our increased market share, the operating leverage within the business and our negative working capital cycle, we are well positioned and remain confident in delivering our long-term targets of £1.4bn of revenue, an 8 per cent profit before tax margin and 75 per cent post tax free cash conversion driving strong returns for our shareholders.”

The DFS business was founded in 1969 by entrepreneur Graham Kirkham from a single store near Doncaster. It floated on the London Stock Exchange in 1993 with a market capitalisation of around £270m, trading from 21 stores. Today, the group employs around 5,000 staff and trades as three separate brands: DFS, Dwell and Sofology