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DFS continues to invest for growth online and off, as sales and profits fall

Image courtesy of DFS

DFS says it is continuing to invest for growth both online and off, as it reports a dip sales and a 70% fall in profits.

The sofa-to-mattresses retailer says that it has increased to record levels its share of a declining upholstery market, and it sees more opportunities to expand beyond that market.

DFS says it continues to believe that a combination of physical and digital channels is the best way to serve its customers and that it is continuing to invest accordingly. Its most recently refurbished showrooms, it says, are paying back the investment in less than two years while sales are rising (+5%) at the same time. Online, orders for beds and mattresses grew by 70% in the first half of the year.

The update came as DFS group reported revenues of £544.5m in the six months to December 25 2022. That’s 2.1% down on the same period last year, and 9.4% up from pre-pandemic 2019. 

Ecommerce sales accounted for 24% of 2022 revenues, up by 1 percentage point (pp) on last year, and by 6.5pp on 2019.

Pre-tax profits fell by 70.2% to £6.8m, from £22.8m a year earlier. On its continuing operations, pre-tax profits came in at £5.7m, down by 69.4% from £18.6m last time. Its discontinued DFS operations in the Netherlands and Spain made a trading loss of £0.6m on revenue of £1.9m. DFS says profit margins have fallen to 52.7% – having been at an average of 58% up to its 2019 financial year – as the costs of goods and shipping as well as general inflation all rose.

In its full year, it expects pre-tax profits before brand-related write downs to come in at between £30m and £35m in the full-year. Its longer-term ambition is to grow revenues to £1.4bn and operate at a pre-tax profit rate of 8%. 

Multichannel strategy

Despite the fall in overall sales, DFS says it grew its share of a declining upholstered furniture market , which has fallen in size by an estimated 15% compared to pre-pandemic levels. Its own share has grown to an “all time high” of 38%, from 36% last time, and it sees opportunities in other areas of the furniture market.

“Having now established the supply chain foundations and developed the product proposition, we plan to accelerate our investment in marketing to drive awareness and growth in the the beds and mattresses market, focused on our digital channels,” DFS said in today’s half-year statement. In doing so it aims to grow its share of a £3bn market. It has extended partnerships with brands such as Joules and Cath Kidston to bed frames, and is also focusing on the market online and in-store through digital tablets and large screens. 

DFS also sees data as critical to maintaining a market-leading position in the sector – from winning and converting new customers to making delivery more efficient. Its own Integrated Retail Intelligence System brings together data sources to give a unified view of the customer.

DFS sells online and through stores under three brands, DFS, Sofology and Dwell. DFS is ranked Top500 in RXUK Top500 research

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