DFS is sitting comfortably as trade picks up

DFS chief executive Ian Filby
DFS chief executive Ian Filby
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​SOFA specialist DFS Furniture reported strong trading over the past four months as the market picked up after a weak autumn when balmy weather deterred customers from shopping.

The Doncaster-based firm said weak footfall and trading last year led to a 24 per cent tumble in earnings to £23.8m in the half year to January 25.

DFS’ chief executive Ian Filby said: “​When you get a real, long sequence of warm weather in the summer and autumn it changes the cycle of customer demand.

“It came good from the back end of November. We’re pretty optimistic about current trading.

“Not all the issues have gone away, but when you look at the drivers of our market – the general sense of consumer confidence and ​the increase in housing transactions – that can drive the market harder than disposable income, which is still under pressure for a lot of people.”

The company said its strong performance over ​​the past four months will contribute to a positive start to the second half.

DFS is in the process of broadening its appeal to more upmarket shoppers who previously​ ​considered the ​brand to be too downmarket and promotions driven.

​​Earlier this year it announced a new brand partnership with Dwell, the contemporary furniture and home accessories retailer.

“This will help us to broaden our customer appeal by extending our links with more aspirational brands,” said Mr Filby.

​DFS hopes the link-up with Dwell will replicate the success it has seen with the launch of high quality sofas handcrafted in the UK under the Country Living, House Beautiful and French Connection brands.

“It’s early days with Dwell, but we’ve been delighted with the early performance,” said Mr Filby.

“They attract a customer group that’s really compatible with our customers. We’re quietly pretty excited.”

He added that DFS has invested in the three growth areas driving retail – value, as seen by the rise of the discount grocers, added value, as seen by the success of the likes of John Lewis and Waitrose, and web sales.

At the value end of the market the group is selling a fabric, three-seater sofa for £299.

“It’s a classic, fantastically made sofa that’s extraordinary value. It’s also guaranteed for 10 years. We’d challenge anyone to provide that value,” said Mr Filby.

The group is covering the added value market with its Dwell, Country Living, House Beautiful and French Connection partnerships.

In online, t​he group has launched a new website which makes it easier for the growing number of customers who access online through tablets and mobile phones.

“One of the big decisions we made when we re-platformed the website was to make it tablet format,” said Mr Filby.

“Half of the traffic coming in online is in tablet and mobile. There has been an explosion in ownership of tablets.”

​DFS​ opened three new stores in the first half, including its 100th​ ​store in Devon.

​The group​ has been trialling a local distribution centre concept in the south east, wh​ereby it has moved warehousing out of four stores, thus freeing up space for more merchandise.

​“We’ve got a fascinating opportunity with our estate,” said Mr Filby.

“The majority of our stores have 400 to 500 square metres of warehousing space at the back so you’re paying retail rents for warehousing.

“It’s a lot more cost effective if you create a proper bespoke warehouse operation​ and it creates more retail space across the estate.”

Following a boost in sales and profits at the south east trial, DFS is planning another one in the North West of England.

“If the second pilot goes as well, we’ve got 80 plus backshop warehouses,” said Mr Filby.

“We could exploit the opportunity.”

The group continues to be strongly cash generative.

It had cash balances of £34m at the end of January after paying out a £20m dividend. This was up from £22m the previous year.