DFS edges closer to Sofology showroom target
DFS has said it is getting closer to its nationwide target of 65-70 Sofology showrooms, despite the retailer seeing its profits almost half during the last financial year (FY23).
In the year ending 25 June 2023, the furniture retailer opened three Sofology showrooms, bringing the total amount to 58. When DFS acquired Sofology in 2017, it had 38 showrooms.
However, the retailer posted a decline in reported pre-tax profit during the period of 49.2% to £29.7m, down from £58.5m during the same period the previous year.
DFS said the decline was anticipated, given strong post-Pandemic sales the prior year and weak market demand in 2023, combined with inflationary pressures.
The retailer’s revenue from ongoing operations (excluding its discontinued businesses in Spain and the Netherlands) also fell, declining 5.3% year-on-year to £1.09bn. However, this was 13.8% ahead of pre-pandemic levels.
Despite recording falls in revenue and profit, DFS said it was continuing to win market share in a “very tough market”, and said it had extended its market leadership by 2 percentage points to a record 38% of the UK upholstery market.
The retailer also said it was operationally in the strongest position since the Pandemic, reflected in its customer experience scores, with supply chains, order banks and customer lead times all back to normal.
DFS said its underlying pre-tax profit guidance for the current year (FY24) is a low single digit year-on-year gain to somewhere between £30m and £35m, supported by continued market share gains and improvements to margins.
Tim Stacey, DFS chief executive officer said: “The group is operating in one of the toughest economic climates we have experienced. Whilst we are confident the upholstery market will recover, forecasting the specific timing and pace of the recovery is challenging.
“We do, however, expect to generate a modest year-on year-increase in profit before tax in FY24 despite a relatively weak market in which we expect volumes will continue to decline across the next 12 months.”
Earlier this month, DFS agreed £250m of new credit facilities, which the retailer said represents an positive endorsement of the confidence it maintains with its long-term banking partners and the wider credit market.