Profits fall by a fifth at DFS
The upholstered furniture retailer has reported a 22% fall in profits despite sales growing by £10.4m.
The preliminary results show for the 52 weeks ended 29 July 2017, gross sales rose 1.1% to £990.8m from £980.4m in 2016. Online sales rose by 10.7%, whilst Sofa Workshop achieved double-digit percentage sales growth and solid profitability during the year.
EBITDA was down 12.7% to £82.4m, whilst pre-tax profits fell 22.3% to £50.1m from £64.5m on last year.
DFS said that the second half has been a ‘very challenging furniture market environment’ which led to the impact in both revenues and profits. It blamed the continued weakness of the pound against the US Dollar, which created a ‘headwind’ for gross margins.
The company stated that it has maintained its commitment to investment with its takeover of Sofology, which is under investigation from the CMA, and believes the brand will ‘broaden its appeal to customers’.
Its partnership with brand upholstery orders rose 20% as it announced a collaboration with Joules to produce its first sofa collection. DFS opened three new 10-15,000sq ft stores during the year and is trialling a third smaller concept store in Crawley.
DFS outlined three new stores UK which are scheduled to open in the current year at Wednesbury, Rugby and Haverfordwest. A major refit of its Croydon store is also currently underway, which will reopen on Boxing Day. DFS continued the substantial growth programme in Dwell, which opened 15 stores and a new national warehouse in the financial year, doubling the size of its Retail network.
Ian Filby, DFS CEO, said: “We have continued to make good strategic progress across all our key areas of growth, while our financial performance reflects the current challenges of the UK furniture market. In particular we were delighted to announce the acquisition of Sofology and the exclusive licensing partnership with the British lifestyle brand Joules.
“Historically DFS has been able to build its market leading position and generate strong cash flow for shareholders in all environments by leveraging its fundamental strengths. Our recent strategic investments and operating efficiency programme support our confidence in our ability to deliver modest profit growth and cash returns in the current financial year and we continue to have excellent prospects for the long term.”