Uncomfortable year ahead for DFS and overall furniture market, says GlobalData – Retail Times
Following today’s release of DFS’s figures for FY2021/22; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers his view: “DFS has had a positive FY2021/22, as it outperformed the upholstery market, but has reiterated how challenging the next 12 months are set to be for furniture retailers as the cost-of-living crisis clamps down on consumer confidence and spend. For the reported period, DFS achieved overall growth of 8.5% to record sales of £1,158.8m as it wound down the larger order book it accrued during 2021’s more buoyant trading conditions as well as this period’s Boxing Day Sales period being less impacted by lockdowns. Since April however, orders have fallen below pre-pandemic levels as more constrained shoppers have shied away from making larger, discretionary purchases.
“This trend has continued into its FY2022/23 with weaker trading in July and August, before recovering slightly in September, with DFS now presenting three scenarios for the current year, ranging from a 5% to 15% decline in like-for-like orders on FY2019. Pretax profits under these scenarios range from £54m to £20m. This compares to a pre-tax profit of £50.2m for its FY2019. This more pessimistic view of the next 12 months has concerned investors with its share price declining by 13.0% in early trading.
“These dialed back forecasts however are more a reflection of a challenging market rather than internal issues at DFS. It can point to the positive returns on investment during its FY2021/22 and its future plans will put it in good shape once the market recovers. Improving the store environment in 47 DFS outlets has seen these stores sales increase by 5% and it is continuing to develop its offer in other furniture sectors such as bedroom furniture. DFS has expanded its partnership with Eve Sleep into more stores and has launched its first non-sofa advert.
“DFS is also investing more in its supply chain to reduce future lead times. Its Doncaster manufacturing facility has been reconfigured to improve efficiency and has invested in recruiting more delivery drivers. It has also brought both fascias onto its delivery planning system Apollo, with a future aim of being able to deliver mixed loads from both DFS and Sofology from a single van to improve efficiencies further. Beyond lowering costs, this will improve the consumer experience which took a hit during the COVID induced supply chain disruption of the last couple of years.
“DFS is also entering into its FY2022/23 with an order book which is £30m higher than pre-pandemic levels which will support the start of its new financial year, as will its greater focus on catering to AB shoppers who are more able to make larger purchases. However, DFS still needs to appeal to a wide customer base. Highlighting its entry level ranges So Simple and Boxit on its website when prospective customers conduct online pre-purchase research will help it to appeal more to constrained shoppers. Reiterating its interest free credit offer, with its new intelligent lending platform offering it the ability to offer a quicker decision, should also be highlighted to encourage shoppers.
“Sofology has been the better performing fascia of the two as it benefitted from opening seven new stores, continued advertising campaigns and new ranges including a capsule collection with TV personality George Clarke. This expansion has helped it be more considered with the figures from GlobalData’s Quarterly Home Tracker showing that the average consideration among upholstery shoppers for Sofology has improved by 0.2 ppts during this financial year. The same survey also shows that conversion has been a problem for it as it trails its competitors in this sector, with Sofology’s greater focus on design potentially being too contemporary for some customers.”
Following today’s release of DFS’s figures for FY2021/22; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers his view: “DFS has had a positive FY2021/22, as it outperformed the upholstery market, but has reiterated how challenging the next 12 months are set to be for furniture retailers as the cost-of-living…
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