DFS stifled by supply chain to end 2021 as it lays out new strategy, says GlobalData

Following today’s release of DFS’ figures for H1 FY2021/22; Matt Walton, senior retail analyst at GlobalData, a leading data and analytics company, offers his view: “Sales at the upholstery market leader DFS cooled slightly following a strong 12 months of trading post the spring 2020 lockdown, declining by 2.0% to £561.1m as it was impacted by supply chain disruption. However, it should be noted that, despite this slip, total revenue remained 14.1% ahead of H12019/20 (with Sofa Workshop included in the comparative). This disruption impacted DFS throughout its supply chain, with port delays, higher levels of COVID-related absences, which impacted on average around 10% for its new final mile delivery offer, the Sofa Delivery Company, and raw material shortages. This disruption was especially felt between July and September though this corrected itself in the run-up to Christmas with delivered revenues being 24% higher in Q2 compared to Q1.

“Sofology was the better performing fascia, as it grew sales by 2% in H1, aided by the opening of six new stores in 2021. This expansion is set to continue throughout 2022 with a new Bristol store set to open before June, as it works towards its target of operating 70 stores by June 2026. These new openings helped it become more considered among prospective upholstery shoppers, as survey data for GlobalData’s Q4 2021 Quarterly Home Tracker survey showed that nearly one in ten shoppers considered Sofology when looking to buy, placing it third. The fascia also launched a new range in partnership with the TV architect George Clarke in November 2021.

“Developing Sofology is one of three pillars for its new Pillars and Platforms strategy, which aims to achieve sales of £1.4bn by June 2026. The other pillars include investing in DFS stores and ranges, as well as building its presence within bedroom and other living room furniture. These pillars will be supported by the group investing in areas such as its domestic manufacturing and the Sofa Delivery Company. Initial investment in refreshing DFS stores has been positive with recently refurbished outlets trading at 5% ahead of the like-for-like estate. It has also recently launched a 100% vegan upholstery range and started selling Eve mattresses online from March, with a view to launch them instore before the end of 2022.

“DFS remains confident about 2022 with its order bank being £175m up on a two-year pre-pandemic comparative and retaining the lower end of its profit before tax forecast for FY22 at £66m (however, its upper range was lowered by £11m to £85m to reflect supply chain disruption). However, from Q2 2022, the furniture market is set to become much tougher as the higher cost of food, utilities, fuel and national insurance contributions all start to clamp down on shopper spending power and make big-ticket purchases more considered. A greater proportion of spend returning to leisure, clothing and foreign holidays will also siphon off home purchases.

“DFS’ historical focus on appealing to affluent shoppers through partnerships with aspirational third parties will help insulate it to an extent but it should also showcase its So Simple and Boxit entry level ranges online to appeal to constrained shoppers. Diversifying into beds and mattresses will also support the retailer during this challenging period as it makes it more of a furniture destination. Improving customer awareness of these new ranges with GlobalData’s Q4 2021 Quarterly Home Tracker survey indicated that DFS was the 21st most considered retailer for bedroom furniture, though it can leverage its sizable advertising spend to achieve this.”