DFS has reported achieving a record market share of 38% during its financial year ended 25th June 2023, with underlying profit before tax and brand amortisation "in line with previous guidance", at slightly above £30m, despite the market being "significantly worse than expected".
Gross margin rate continued to improve, supported by freight costs returning to pre-pandemic levels and effective cost control. Gross sales increased by +15% compared to the comparative* pre pandemic period (FY19, which excludes the group's international performance, and Sofa Workshop, given the subsequent closure of these operations), but were down -4% YoY.
DFS says consumer demand continues to be impacted by the macroeconomic environment, with market volumes down by c.15-20% across FY23.
The retailer expects to continue to outperform "a declining market" in FY24, and grow market share, delivering low single-digit £m profit growth. Trading at the start of the year has been consistent with the board's expectations, yet the uncertain economic outlook has prompted DFS to be prudent in its planning, taking actions to maximise operating cashflow through continuous margin improvement, delivering cost savings and reducing capital expenditure.
It expects underlying profit in FY24 to be slightly above FY23 levels – and, when the market recovers, given its increased market share, the operating leverage within the business and its negative working capital cycle, believes it is well positioned to deliver its long-term targets of £1.4b of revenue, an 8% PBT margin and 75% post-tax free cash conversion.
Tim Stacey, group chief executive, says: "We are in the strongest position we have ever been as a group in terms of market share, and when the market recovers, we will be well placed to deliver our strategy and grow our earnings and cash flows towards our longer term plan."
The group will report its full FY23 results on 21st September.
