Following today’s release of DFS’ figures for the 52 weeks ending 25th June 2023; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers her view: “DFS has experienced a challenging H2 FY2022/23, with sales down 8.2%, leading to its first full year sales decline outside of pandemic-impacted periods since its FY2011/12, with full year revenue 5.3% lower at £1,088.9m. This deterioration in 2023 comes despite it entering the period with an elevated order book following an 18.8% uplift in orders between October and December 2022. The squeeze on shoppers’ spending power undoubtedly impacted demand for bigger-ticket purchases, with upholstery forecast to fall by 6.6% in 2023. This tightening has hit DFS harder than some of its rivals though, with ScS reporting like-for-like order growth of 6.0% for the 18 weeks to 29 July 2023.
“There are positives beyond its topline results, however, which have buoyed early investor sentiment. DFS has been able to improve its gross margin by 170 bps, aided by lower shipping rates and input prices as well as increasing its selling prices, and it remains on track to achieve its pre-pandemic gross margin of 58% by the end of its FY2023/24. The retailer’s profit before tax guidance for its FY2023/24 of between £30 and £35m is also up on this year’s figure of £30.6m, aided by further gains in gross margin and achieving efficiencies through its showrooms and logistics.
“Sofology was the better performing fascia as it benefitted from the opening of three new stores and its greater focus on design appealing to an affluent, professional shopper that is more able to make larger purchases. The fascia will also have benefitted from the collapse of Made.com in November 2022 as it served a similar customer. Sofology has a long-term target of overtaking ScS to be the second largest upholstery retailer in the UK, which will be challenging as it would face a tough balancing act of becoming more mass market whilst retaining what currently makes Sofology distinct. Improving service levels will be key to achieving this as, despite improving by 43 points, its internal NPS score remains negative at -6.
“The market will remain tough for the next nine to 12 months as inflation remains high and shoppers continue to be more considered with big-ticket purchases. For its FY2023/24, DFS expects its group revenue to decline, and it is anticipating a mid-single figure volume decline in upholstery. Against this backdrop, extending into other furniture categories is a prudent move with bed and mattress sales up 69% for the year, albeit from a small base, as it encourages more frequent visits. DFS is aiming to leverage its partnerships with French Connection and Joules in beds, helping to boost awareness of this fledgling offer.”
