DFS remains ‘broadly’ on track in spite of sales drop

Sofa chain DFS has said annual profits are set to remain “broadly” on track despite revealing a half-year sales tumble amid difficult retail conditions.

The group posted a 6% fall in gross sales for the six months to December 29 after a particularly tough August and September.

DFS – which also owns the Sofology, dwell and Sofa Workshop brands – said full-year underlying profits would be roughly in line with forecasts thanks to better recent trading and an expected “low single- digit” rise in sales over the final six months.

But investors remained unconvinced, with shares falling 3%.

Experts at Jefferies said the gross sales slump indicated a like-for-like sales drop of around 7% over the half-year.

DFS said the sales fall in the first half “reflects the challenging market environment impacting footfall and the performance in the strong prior year period”.

Since the late summer and early autumn sales woes, DFS has seen improved order intake and added that key winter promotional sale trading had started “satisfactorily”.

Overall group revenues are also set to be given a boost by the addition of new showrooms over the past six months.

The market is currently expecting annual underlying earnings for DFS to edge up slightly to £51.2 million from £50.2 million the previous year.

DFS said: “We are mindful of the broader political and economic uncertainty that still exists.

“However, we have made good progress on our strategic initiatives, driving showroom conversion and online growth.

“Furthermore, we have appropriate cost-saving actions in place to help mitigate continued market weakness.”

The group said on announcing annual results in September that cost-saving measures include renegotiating lower rents and housing brands under the same roof where it has more than one outlet in the same retail park.

It is aiming to secure £6 million to £8 million of annual rent savings through renegotiating lease terms.

Jefferies analyst Caroline Gulliver said the 6% sales slide was a “little worse than we feared”.

But she added: “UK consumer confidence has started to improve and there is every chance that confidence will continue to improve into DFS’ key spring selling season, driving second-half sales.”