DFS has reported a continued strong performance in its H2, with revenue up 7% YOY, and also up 7% for the whole financial year. In light of this, the retailer expects to deliver a record performance this year, with results towards the upper end of expectations.
Growth initiatives include a measured programme of store expansion in the UK and overseas, retail space release, continued development of its omnichannel proposition and constant enhancement of the product range, generating revenue growth above that seen in the wider retail furniture market.
Revenue growth has benefited from the contributions of the Sofa Workshop and Dwell subsidiaries, which together added around 1% point to overall growth in both the second half and full year. As anticipated, the margins achieved by both subsidiaries are currently lower than overall group margins given their more limited scale, pre-opening costs and the requirement to invest further in infrastructure.
The group has established a successful store-in-store concept for Dwell to occupy store warehousing space converted for retail use in the DFS estate. This has led to a decision to accelerate the retail space conversion programme and Customer Distribution Centre (CDC) openings – 11 of which are now operational, with a further eight expected to open by the end of FY2017.
DFS says that the initiative is likely to generate incremental profits when compared to conversion of that space to retailing of beds and dining furniture.
The group's trading since the referendum result has not indicated any weakening of demand, but admits that the six weeks since 23rd June is too short a period to make a meaningful assessment of future trends. It says that store sales densities, scale of operations and a highly flexible cost base provide resilience against weaker trading conditions, relative to the retail sector. Furthermore, vertical integration provided by its in-house UK manufacturing operations limits currency exposure.
DFS believes market expectations for revenue for FY2016 to be between £746.9m and £755.5m, and for profit before tax to be between £60.7m and £64.6m.