DFS says orders have slowed as consumer demand has fallen in recent months.
The multichannel furniture retailer, ranked Top350 in RXUK Top500 research, says that while its orders grew by a double digit percentage in the third quarter of its financial year – to March 27 2022 – they have slowed in the fourth quarter. The fall in orders, it says, reflected Barclaycard findings that transactions fell by about 2.1% in April compared to pre-pandemic levels. That trend continued into May.
DFS says that in the second half of its financial year it had increased its weekly production and deliveries to record levels, but since April, both orders and production levels have fallen below expectations. Supply chain disruption has also been an issue. However, it says, it continues to retain its share of the market.
The upholstered furniture retailer now expects full-year sales to come in at about £1.2bn, and pre-tax profits at between £57m and £62m. Both are ahead of pre-pandemic revenues of £996.2m and pre-tax profits of £50.2m in the 2019 financial year. Sales are also expected to be slightly higher than in the 2021 financial year, when DFS turned over £1.1bn, but its pre-tax profits are likely to be lower than the £99.2m that it reported that year.
DFS says that it expects to close the year with net bank debt of less than £100m, and that it continues to have further room for borrowing, with existing facilities of up to £215m.
By the end of the year it expects to have orders worth about £30m higher than pre-pandemic levels – equivalent to 2.5% of annual sales.
In today’s trading update DFS says: “It is difficult to forecast consumer behaviour over the next 12 months, but should the trends observed in April and May continue across FY23, this wold broadly balance the volume benefit from the elevated opening order bank. Following the growth of the group in volume terms relative to pre-pandemic levels, we also believe that we have the opportunity to drive further cost efficiencies from our scale.
“However, our trading history shows that the group has gained market share during periods of furniture market decline, and we believe that we will remain well-positioned against the market, given our scale, brand strength and our integrated retail strategy.”