DFS shares dip as interim results affected by ‘challenging environment’

DFS Furniture PLC (LON:DFS) have seen their shares dip following the announcement of their interim results.

The homeware provider said that its’ profit within the first half had dropped, however they had seen an ‘encouraging’ start to the second half.

Shares in DFS Furniture trade at 202p (-3.11%). 10/3/20 10:07BST.

Across the half year period, which ended on December 29 – DFS said that pretax profit totaled £15.9 million.

Notably, revenue also dipped 5.7% to £488 million from £517.6 million.

DFS were quick to say that challenging market conditions and wider macroeconomic challenges affected results, as consumer confidence was still fragile.

’Trading performance in the first half of our financial year reflected not only the strength of the comparative period but also the challenges of a market environment that saw political uncertainty and low consumer confidence levels feeding through into lower footfall.

We mitigated some of the footfall decline by converting a higher percentage of customers, particularly in DFS and Sofology, relative to the prior year and by growing our Group online revenues. However, these trading conditions have ultimately fed through into our results for the first half.’

Online Growth was strong for DFS, as sales rose 4.5% from £112 million to £117 million.

On a slightly better note for shareholders, the firm left its interim dividend flat at 3.7p per share.

Tim Stacey, Group Chief Executive Officer said:

“We continue to make progress on our strategic agenda focused on driving the DFS core business, further developing our Group platforms and setting Sofology up for future growth. Despite the challenging retail environment, and excluding some isolated systems disruption in Sofa Workshop, our performance over the first half has been as expected, given the exceptional prior year comparative driven by latent demand. In particular we have seen a good performance by the DFS brand in driving conversion and margins and continued online sales growth.

Trading in the second half for the Group has also started satisfactorily with performance in the DFS brand particularly encouraging, with order intake growth year-on-year and good gross margins”.

DFS also added that the firm will not speculate on its’ full year performance due to the recent coronavirus outbreak.

The firm noted that their supply chain should remain steady across the rest of the financial year, and recent changes in trading have only been noted recently.

“However, given the uncertainty as to how the current COVID-19 situation will develop it is not possible to give guidance with any certainty for the full-year out-turn. At present we believe our supply chain position should normalise before the financial year end, and it is only in very recent days that we have observed any change in consumer footfall to our showrooms.

While any disruption to order intake over the key trading periods of Easter and the May Bank Holidays is likely to impact our financial year 2020 results, it is reasonable to believe this may ultimately be transitory in nature; following periods of subdued demand we typically see much of that latent demand returning.

Notwithstanding the uncertain short-term outlook, we remain confident in the Group’s financial strength and relative track record of performance in all environments. Furthermore, we believe our leading market position will allow us to drive long term attractive value creation for our shareholders.” – Stacey concluded.

DFS see mixed start to 2020

In January, DFS updated the market by giving shareholders a pre-warning on their interim results.

The firm said that interim sales fell, however they reiterated the fact that they expect full year results to be in line with expectations.

The company said forecast profit before tax and brand amortisation for the financial year ending June 28 remains in line with market expectations at £51.2 million, up from £50.2 million in financial 2019.

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