The chief executive of DFS has said that the wider market slowdown surrounding ‘big-ticket’ purchases is stabilising, rather than recovering.
The sofa retail group, which encompasses the DFS and Sofology brands, almost doubled its underlying profits to £17m during the six weeks to 29 December 2024, compared to £8.7m for the same period last year.
Gross sales crept up by 1.4% while the number of customer orders increased by more than 10%, despite widespread hesitation among consumers surrounding “big-ticket” purchases for their homes.
DFS chief executive Tim Stacey told Retail Week: “I’d love to say the slowdown coming to an end, but I think the word we’d use is stabilising.”
”Some of the metrics that we look at that are very relevant to our particular market, consumer confidence, and climate for major purchase are improving slightly. Secondly, housing transactions, which drive 20% of our business, have been in growth for the last 10 months and household income is also improving. So stabilising Is probably the word that we would use, rather than recovering. We’re not seeing market growth, we’re seeing it plateauing which is, I guess, an encouraging sign.”
The group upped its full-year profit forecast from £22m to between £25-29m for the full financial year, as a result of “continued strong trading, good cost control and assuming no further supply chain disruption”.
Orders at Sofology outperformed DFS, with intake growth up by 19.1% versus 7.8% for DFS, and year-to-date orders across the group are now up by 11% year on year.
The group also said it had grown market share during the period and achieved a 70bps improvement in its gross margin rate to 56.7%.
Stacey said: “We’ve had a really good first half of the year up to December 29. Our sales in our stores and websites are up 10% year on year, both DFS and Sofology brands are growing well, and that’s against the backdrop where we think the market was slightly down. So we think we’ve taken a decent amount of market share in half one.
“The other good news is around our gross margins, which have improved 70 basis points, and our costs are down, and therefore we’ve delivered a good profit.
“Our customer scores are some of the best I’ve ever seen in the business, and operationally we’re doing well and seeing some really good growth, particularly in DFS with our exclusive brand ranges. We’re also seeing good cost control, so we’re really pleased to give a bit of a profit upgrade today.”
“Looking ahead, we’re slightly cautious about what happens from April onwards, obviously with changes in national insurance, the national living wage, and what might happen with the economy, etc. So we’re not expecting to continue at these levels of 11% year-to-date and we expect to see a little softening in the fourth quarter, but we’re still optimistic about the future.”
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