Sofa gross sales ‘strongly linked to shopper confidence’: DFS doubles profit but warns of Brexit blow to demand and border delays
- Half-year profit at couch group DFS rose from £6.2m to £14.1m, outcomes present
- Group says it’s persevering with to take steps to mitigate dangers from Brexit
Consumer demand and doable border delays pose couch group DFS the largest complications in relation to Brexit, the corporate has claimed.
In its newest half-year outcomes, the group stated: ‘Consumers’ willingness to make a purchase order of upholstery is strongly linked to shopper confidence. The persevering with important uncertainty has clearly impacted shopper confidence.’
On the difficulty of potential border delays, DFS stated: ‘We would nonetheless see a deferral in income in our made-to-order mannequin.’
The couch chain’s pre-tax profit greater than doubled from £6.2million to £14.1million a yr earlier.
Risks: DFS stated Brexit-related doable border delays and shopper confidence pose dangers to the agency
In the 22 weeks to 30 December, group income rose 29.1 per cent to £422.3million, whereas underlying earnings climbed 23.eight per cent to £32.8million. Operating profit surged 41.9 per cent year-on-year to £31.5million, whereas on-line gross sales rose by 22 per cent.
Like-for-like gross sales at Sofology had been up 14 per cent, and DFS stated it was on monitor to realize £4million in price financial savings from its acquisition of the group.
The homewares and furnishings retailer stated the outcomes had been boosted by its acquisition of Sofology, on-line gross sales, and from orders positioned by clients who had deferred their purchases because of the unusually sizzling summer time of 2018.
On its preparations for Brexit, boss Tim Stacey stated: ‘While we now have sought to mitigate these, their final affect is unsure and have the potential to have an effect on our total monetary efficiency within the yr.
‘We will proceed our preparations to minimise the disruption as half of our common risk-mitigation course of, till the UK and EU’s path ahead is evident.’
Profit increase: Pre-tax profit at DFS greater than doubled from £6.2million to £14.1million a yr earlier
Chief govt Mr Stacey stated latest buying and selling had been softer amid poor shopper confidence ranges, that are anticipated to proceed in a ‘significantly difficult’ market this yr.
He added: ‘Although figuring out underlying development charges over short-term intervals is extraordinarily troublesome, we observe that year-on-year order consumption within the second half of the monetary yr thus far has been decrease than the primary half.
‘Assuming no additional weakening of this setting, our profit expectations for the monetary yr stay unchanged.’
Jefferies analysts stated DFS’s technique is delivering outcomes but it’s ‘exhausting to keep away from cyclical bumps.’ Peel Hunt analysts additionally backed the corporate’s technique.
Matt Walton, a senior retail analyst at GlobalData, stated: ‘The upholstery market chief completed 2018 on a excessive with a powerful efficiency throughout the board; revenues elevated by 29.1%, and by 9.9% with Sofology included for the entire interval, to £422.3m because it benefitted from gross sales deferred because of the climate.
Uncertainty: On its preparations for Brexit, boss Tim Stacey stated: ‘While we now have sought to mitigate these, their final affect is unsure’
‘Each fascia skilled like-for-like development, web debt fell in absolute phrases, profit earlier than tax greater than doubled and full yr profit expectations stay unchanged.’
He added: ‘DFS has signalled, nonetheless, that early 2019 has been harder, because it skilled “a softer start” with the uncertainty surrounding Brexit denting confidence.
‘GlobalData’s Consumer Sentiment Tracker reiterates this with the proportion of buyers that intend to spend much less on furnishings within the subsequent six months up by 2.2 and zero.6 proportion factors in January and February respectively.
‘However, with the better potential at Sofology, improved shopper spending energy and returning confidence (assuming a Brexit deal is accomplished quickly) feeding by means of into large ticket and DFS persevering with to spend money on multichannel and its vary, it’s properly positioned to outperform the furnishings market in 2019.’