DFS continuing to sit pretty, says GlobalData

Following today’s release of DFS figures for H1 FY2020/21; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers his view: “DFS has been a beneficiary of customers investing in their homes, with revenues up 17.3%. The pent-up demand after the spring lockdown was released and DFS regained the lost revenue within 11 weeks of reopening. This growth could have been stronger still were it not for disruption with containers and the shortage of foam across Europe preventing a proportion of its deliveries from being recognised in H1. These topline gains have filtered through to the rest of its financials, as it has significantly reduced its debt and forecasted profit remains towards the upper end of expectations.

“Upholstery was severely impacted by store closures in 2020 with customers unable to test a sofa prior to purchase. However, DFS’ investment in online has helped counterbalance this, with online sales up 66.2% as shoppers became more confident about buying through this channel. Pre-purchase research has been the focus of this investment, which is the right move as online is predominantly used as an initial filter for shoppers. The changes to online include more models to its augmented reality tool and improving its visual search, where customers use a picture of a sofa to find similar DFS sofas. The entire online journey has been improved as well with quicker loading times and an enhanced checkout.

“DFS is advancing online further by trialling video-in-store at 11 locations, with customers able to see the product in a showroom setting and ask for advice from members of staff, similar to Furniture Village’s Virtual Village. This is a strong move as it enables the retailer to add a customer service element to its online offer and enables it to trade customers up.

“DFS remains in a strong position so far in 2021: its continued growth in online has contributed to its order book remaining £65m ahead of last year and it is currently refining investment plans for an internal manufacturing capacity, which will help lower lead times. The retailer is also investing more in sustainability credentials, which has become more important to furniture & floorcoverings shoppers. The retailer has made 100% of its packaging recyclable, getting external certification regarding suppliers responsibly and continuing its Sofa Rescue plan, which has so far diverted 65,000 sofas from landfill. 

“It is also set to invest more in Sofology, which was more impacted by the port disruption, with plans to open a further three to seven stores during the second half of its financial year to support the three it opened in the South East during its H1. DFS is also aiming to increase its presence in the wider living room and bedroom market by utilising Dwell’s infrastructure to enable customers to buy into a look. This taps into the growing importance of design among furniture shoppers.

“This greater order book and its strong cash inflows during its first half should enable DFS to ride out the lag between when orders are placed once stores re-opened  and when they are recognised as revenue.”