DFS sits pretty as demand remains buoyant

Sofa chain DFS brushed aside Brexit fears and raised its profit forecast following a record full-year performance.

The Doncaster-based group said while it had not yet seen any drop in demand since the decision to quit the EU, there was an “increased risk of a market slowdown” for the furniture sector.

Chief executive Ian Filby said: “It’s too early to make a meaningful assessment of future trends, but our trading since the referendum result hasn’t indicated any weakening of demand.

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“It’s worth noting that our store sales densities, scale of operations and highly flexible cost base provide resilience against weaker trading conditions, relative to the furniture retail sector.”

He added that the group’s UK-based, in-house manufacturing operations limit its currency exposure as it doesn’t have to import sofas at a time when sterling is weak.

In addition the group’s interest-free, monthly repayment schemes mean customers can spread the cost of big ticket items over months or years.

“With our interest-free credit offer, we provide the option of a more affordable monthly payment, which we know our customers find helpful, particularly should there be tougher economic climates in future,” he said.

The group said that higher costs from the weaker pound and intense competition could cause challenges.

The cautious outlook followed an impressive second half performance, with revenues up 7​ per cent​ year-on-year. The group is now expecting profits at the top end of City forecasts, sending shares surging.

Analysts had pencilled in a rise in pre-tax profits to between £60.7​m and £64.6​m for the year to July 30, up from £10.​7m​ for the previous year.

Retail sales figures have so far held up well despite signs of falling consumer confidence, but a Bank of England survey of firms noted shopper demand for large items had fallen in the month since the referendum as shoppers become more cautious.

Mr Filby said: “The board recognises that, following the EU referendum, retailing of furniture in the UK faces an increased risk of a market slowdown with additional cost pressures from foreign exchange movements, whilst it is likely that the retail environment will remain intensely competitive.”

But the company put faith in its “resilience” to withstand any downturn.

Retail ​analysts at Jeff​e​ries said: “We are encouraged to see that DFS has not seen a weakening of demand post-EU referendum, which would suggest positive like-for-like sales.”

Mr Filby said the group has been encouraged by trading across all of its ranges, including its subsidiary labels, Dwell and Sofa Workshop, and also brand partnerships, such as Country Living and French Connection.

​“​The initial reaction to our Britannia range, which we’re especially proud of as the Official Team GB Homewares partner, has been great​,” said Mr Filby.​

​“​It’s an iconic sofa collection, made in our own British factories to British Standards for durability and inspired by the best of British design, materials and workmanship – a tribute to Team GB.

​“We are just delighted to be able to provide support to our athletes that commit so much to achieve the success we have seen.

​“​By working with Team GB we can bring the story of our own British craftsmanship, history and quality standards to life with consumers.​“