Omnichannel retailer DFS [IRDX RDFS] says its growth strategy remains on track, despite falling second-half revenues.
The sofa retailer, a Top250 trader in IRUK Top500 research, reported a 4% fall in second-half revenues, taking growth for the year to 1%. And it warned that profits were likely to be at the low end of the £82m to £87m range it had previously envisaged.
It said that factors including the uncertain economic environment and unexpected general election were behind a second-half fall in store footfall and customer orders throughout April, May and June. But it said its summer sale started “satisfactorily” in July, something it said was “consistent with trends we have seen in offline and online sector indicators”.
The retailer said its online business had maintained strong momentum and market leadership. It said the DFS website attracted more than 40% of web visitors in the upholstery segment, and that it had seen “good increases” in visitor numbers during the year.
DFS has recently announced its acquisition of Sofology. It said the acquisition, which is subject to regulatory approval, brings it a “distinctive and complementary business” with 37 stores and “a strong technology-led omnichannel proposition”. The company is also working with lifestyle brand Joules to create its first collection of sofas.
Elsewhere, DFS’ strategic focus has been on store conversion and new openings, both in the UK and internationally. It is moving to a network of 19 customer distribution centres in the UK, releasing space in stores that is being used for co-located Dwell and Sofa Workshop stores over the next six months. It will also open new stores in the UK, in both 10-15,000 sq ft and 5,000 sq ft formats, and plans to open its sixth Dutch store soon.
DFS said in its trading update today: “While the UK furniture market is currently very challenging with the outlook still uncertain, we remain focused on our growth strategy to deliver substantial long-term returns for our shareholders. Although revenue growth is likely to be harder to achieve in the short term than the recent past, we have identified opportunities to drive operating efficiencies and product margin growth.” It said a recent refinancing would save around £1m a year from the cost of its debt.
• The update came a day after a trading update from competitor ScS [IRDX RSCS], a Top350 retailer in IRUK Top500 research. It also said it was seeing a “softening market environment”, with a 5% like-for-like fall in second half orders, although total orders grew by 1.4%. Over the course of the year, orders fell by 0.7%.
David Knight, ScS chief executive, said: “We are pleased that despite the challenging comparatives and wider market backdrop we have traded in-line with the board’s expectations for the year. Looking ahead, notwithstanding the current trading environment, the board believes the business remains in a strong position to maximise opportunities as they arise and to grow market share.”
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