In its preliminary results for the 52 weeks ended 29th June 2025, DFS Furniture says it has achieved "significant profit growth and reduction in leverage", and that its customer proposition has "never been in better shape".
During the year (against the prior year's comparative period of the 53 weeks ended 30th June 2024), DFS made market share gains, achieved record established customer NPS and achieved its £50m Cost to Operate programme one year ahead of expectations.
Behind these achievements were three key enablers, says the retailer: leveraging its scale, expertise and vertical integration, with exclusive brand partnership ranges now accounting for over 40% of dfs brand sales, cost of goods optimisation driving gross margin progression, and continual improvements in manufacturing and the Sofa Delivery Company's logistics operations increasing efficiency; focusing on technology-led product innovation to remain agile to evolving consumer trends and investing in proprietary data and insights platform to enhance the customer experience; and harnessing its "unique culture".
"Our dedicated and loyal colleagues are vital to our success – our investment in our people and progress on our diversity and inclusion agenda is helping drive improved colleague engagement scores and reduce attrition," says DFS.
The year saw a "resilient" trading performance from DFS, with strong LFL (52 week versus 52 week) group order intake growth, up +10.1% in H1 and +10.3% in H2 in a subdued market, with both the dfs and Sofology brands gaining market share.
Revenue was up +4.4% YoY, lower than the reported order intake growth of +8.7% due to investment in the retailer's IFC offer to drive demand in the market, as well as the impact of Easter falling later in the year, and a shift in customer orders to ranges with longer lead times. "As a result, the group ended the year with a resilient order bank," it says.
Gross margins were expanded by +70bps, reflecting "continued focus on optimising the commercial proposition and improved cost of goods", ansd underlying profits – PBTu(A) – were up £19.7m YoY to £30.2m, slightly above previous guidance (£25m-£29m).
Strong free cashflow generation of £57.8m reduced net bank debt to £107.0m (from £164.8m in FY24) and bank leverage to 1.4x (from 2.5x in FY24).
"While our financial position has strengthened due to improved profit performance and disciplined cash management, our current leverage remains outside our target range of 0.5x-1.0x and the macro environment remains uncertain," DFS adds. "As a result, the board has taken the decision not to recommend a FY25 dividend.
"We will continue to focus on reducing our debt levels, maintaining strong discipline on capital investment and bringing our leverage into our target range."
Trading through the first 12 weeks of the new financial period was been in line with expectations, the retailer continues: "We are comfortable with consensus and are planning for profit growth in FY26, despite our expectation for a subdued market in the near term, driven by our compelling customer proposition, further gross margin progression and continued cost discipline.
"A decision will be made at our FY26 interim results on the payment of an interim dividend based on profit and leverage outturn for the full year and future outlook. Longer term, the board remains confident in achieving our medium-term £1.4b full-year revenue and 8% PBT targets."
Group CEO Tim Stacey says: "I believe that our customer proposition has never been in better shape and that all elements of our vertically integrated business model are working efficiently and effectively, leading to record NPS.
"Through focusing on what we can control and executing our strategy we have grown profits and cash flows in a weak market environment. This would not have been possible without the passion and dedication of our colleagues and I would like to sincerely thank them all for their hard work and support for our business.
"The market demand drivers for the upholstery sector remain delicately balanced. Consumer confidence remains below the long-term average and inflation remains elevated but housing transactions have been recovering, consumer savings levels are relatively high and interest rates look set to fall.
"Given the market share gains that we have made in the last few years, the recovery in our gross margins and the significant reduction in our cost base, despite inflation, I am optimistic about the future. We will continue to focus on what we can control and, even in a subdued market, we expect to grow our PBT in FY26 and further strengthen our balance sheet. When the market recovers we are well positioned to achieve strong growth and importantly profit and cash conversion, and remain committed to achieving our medium-term targets of £1.4b revenue and 8% PBT margins."
