Revenues were down -5.7% at DFS in H1 2020 (to 29th December 2019), in part due to a strong comparative period bolstered by latent demand and a higher opening order bank. YoY, this performance was compounded by challenging market conditions, says the retailer, with consumer confidence and political uncertainty impacting footfall, only partially offset by increased conversions.
Online growth continued, with gross sales up +4.5% to £117m.
Group CEO Tim Stacey comments: “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 YoY and good gross margins. 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.”
H1 saw DFS invest in both its digital operation and showrooms, with increased focus on data analysis to drive customer Net Promoter Score (NPS).
A new delivery operation, The Sofa Delivery Co, was launched in Belfast, presenting the opportunity to save more than £3m a year from the end of DFS' 2022 financial year, and further improve customer experience. Meanwhile, property savings are on track to deliver £6-8m annualised saving by financial year 2023.
Sofology's roll-out accelerated, with three new showrooms opened this financial year and five secured for the next.
Isolated systems-related disruption in Sofa Workshop is expected to cause a one-off annual impact to profit before tax of £4-5m, and a review of the brand's business model is under way.
