Entrants threaten growth at DFS

DFS has warned its bulldozer-like growth story is stalling in the face of heavyweight entrants playing it at its own aggressively priced, advertising-led game.

Executive chairman Lord Kirkham said the growing muscle of MFI, Homebase, Argos and Matalan, combined with the spectre of Marks & Spencer's home standalones, is putting DFS under pressure.

He said: '(I think) there will be a shakedown in the sector. I'm not sure this market in the medium-term can sustain all these entrants.' He complained the intense competition was hastening the deflationary price cycle, impacting on margins and 'damaging the market'.

Although delivering record profits, the news was overshadowed by Kirkham's admission that DFS 'did not expect to make material profit progress in the current financial year'.

However, he was upbeat that growth could be founded on an expanded store network that would enable it to amortise advertising costs. The long-term target remains 100 stores.

The trendy new fascia, complete with 'think sofas, think DFS' tagline introduced earlier this year will reach all 65 stores by Christmas. There are no plans to roll out the Dining Centre standalone trial, which took place in Hull.

In the year to August 2, sales grew by 8 per cent to£499.1 million, registering like-for-like sales growth of 2.5 per cent. Pre-tax profits climbed from£53.6 million to£56.4 million.