Future trading conditions will have DFS sitting on pins and needles despite initial surge in orders

Following today’s release of DFS FY figures for 2019/20, Matthew Walton, Senior Retail Analyst at GlobalData, a leading data and analytics company, comments:

‘‘DFS, the first furniture specialist to announce how it has been affected by the COVID-19 pandemic, has reported a revenue drop of 27.2% for FY2019/20 to circa £725m, as second-half revenue fell by over 50% on last year because of lockdown and the inability to fulfil orders. This has resulted in a loss before tax of up to £58m for the year despite its efforts to reduce costs through deferring rents and readjusting its marketing spend. This loss also excludes a £16-18m impact from restructuring its Dwell and Sofa Workshop fascias.

Despite this sharp contraction in profits, DFS is in a relatively resilient position. Its investment in online, which included improved product visuals and responsiveness, has paid off with a 77% increase in online orders since the lockdown begun on 23 March. This momentum in orders continued once stores re-opened, with store orders up 69% for the six weeks to 12 July as the retailer satisfied pent-up demand from lockdown. This uptick in orders to be delivered will filter through into its FY21 to provide a £100m incremental increase in revenue.

The initial trading from its stores also has DFS more confident on future trading, as it believes the current social distancing protocol will not have a material impact on orders. DFS is in a strong cash position, with just over £160m available at the end of the period, and will also be able to capitalise on excess capacity from Harveys while its future remains uncertain.

DFS’s strong order bank means it is well placed to outperform in the short term but once these orders have been recognised, DFS will emerge into a much more challenging furniture market. GlobalData’s Customer Sentiment Tracker from June found that 31.1% of shoppers intend to spend less on furniture & floorcoverings over the next six months, ahead of only clothing & footwear, as customers cut back in anticipation of a severe recession.”

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