Oversold sofas retailer DFS Furniture (DFS) rallies 12.5% to 252p on relief over the positive tenor of its year-end trading update. With trading having remained brisk through the second half, CEO Ian Filby guides towards a record full-year performance with results to come in 'towards the upper end of market expectations'.
Home furnishings firms have been among the casualties of Brexit, investors alarmed by the impact of the referendum vote on the housing market, consumer confidence and spending on non-discretionary 'big ticket' purchases including sofas, beds and dining furniture.
So today's update from Doncaster-headquartered DFS Furniture has been greeted with relief by investors. They can now confidently expect sales and profit before tax to weigh in towards the top-end of market expectations pitched at between £746.9 million and £755.5 million and £60.7 million and £64.6 million respectively, with DFS also flagging another year of strong free cashflow.
Guided by Filby (pictured below), the UK's leading upholstered furniture retailer and Team GB Olympic sponsor says sales for the year to July grew by a better-than-expected 7%, while sales rose by the same percentage in the second half. This represents good going given the prevailing uncertainty ahead of, and just after, the Brexit vote in late June, with the top-line boosted by contributions from Sofa Workshop and Dwell stores.
Filby attributes the robust performance to 'the implementation of DFS's proven growth strategy, building on its established market leadership to further broaden product and brand appeal. Growth initiatives include a measured programme of store expansion in the UK and overseas, retail space release, continued development of the group's omnichannel proposition and constant enhancement of its product range.'
DFS adds that 'this growth strategy is delivering ahead of the Board's expectations in a number of areas and generating revenue growth above that seen in the retail furniture market.'
Though the British manufacturer acknowledges the increased risk of a furniture retailing slowdown, the weak pound piling on additional cost pressures, DFS says 'trading since the Referendum result has not indicated any weakening of demand, although the six weeks since 23 June is too short a period to permit a meaningful assessment of future furniture retail trends.'
Furthermore, the board believes the business 'remains very well positioned to mitigate economic headwinds with resilient features in its operating model giving it the potential to achieve continued growth in its share of the UK retail furniture market were such adverse conditions to arise and persist.' In addition, 'vertical integration provided by the group's UK in-house manufacturing operations limits currency exposure.'