REG - DFS Furniture PLC - Pre Close Trading Statement

DFS FurnitureAnnouncement

12/06/2024 07:00

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RNS Number : 0421S  DFS Furniture PLC  12 June 2024

THIS STATEMENT CONTAINS INSIDE INFORMATION

 

DFS FURNITURE PLC

 

MARKET SHARE GAINS AND COST BASE ACTIONS PARTIALLY MITIGATE A WEAK TRADING
ENVIRONMENT

 

DFS Furniture Plc, ("DFS" and "the Group"), the market leading retailer of
living room and upholstered furniture in the United Kingdom, announces the
following update on recent trading through to 11 June 2024 of the 53 week
period to 30 June 2024.

 

FY24 guidance update:

At our interim results update on 19 March 2024 we guided that we expected
revenues of £1,000m-£1,015m and PBT(A) of £20-£25m, with an additional
profit risk of up to £4m if Red Sea shipping delays continued through to our
year end date.

 

Since that update, consumer demand in the upholstery sector has remained
challenging and Red Sea routing issues have persisted resulting in delays to
customer deliveries and higher freight costs.

 

As a result, we now expect PBT(A) to fall in the range of £10-12m, with the
reduction in profit expectations being driven by:

·      A lower level of delivered customer orders, with £12-14m of
delayed deliveries from the Red Sea disruption. Those deliveries are expected
to move into FY25. FY24 revenues are now expected to be in a range of
£995m-£1,000m.

·      Higher shipping costs as a result of freight rates increasing
above previous expectations in our fourth quarter.

·      A weak upholstery market partially mitigated by selective
investments to stimulate required order volume levels in Quarter 4.

 

Progress on our focus areas has helped to partly mitigate the profit impact of
a very weak upholstery market:

Consumer demand in the upholstery sector has declined c-10% in volume terms*
year on year from a weak starting point bringing overall market demand levels
to record lows. The Group has continued to operate through the period with
record value market share of over 38.5%*.

 

Despite higher shipping costs and investments to drive required order intake
volumes in Q4, we have continued to grow our full year gross margin rate,
which is expected to be up +140bps year on year. In addition, we have reduced
our operating costs** which are expected to be down approximately £25m year
on year. Together these have limited the lower sales impact on our
profitability.

 

Net bank debt at the end of the period is expected to be £165-170m (total
facility size £250m).

 

*Proprietary banking data from external third party providers

**Excluding depreciation and interest

 

Recent trading and outlook into FY25:

We have been encouraged by an improving trend in our Group order intake, which
is up over +9% in our fourth quarter to date, in line with our expectations.
The recent improvement comes as we annualise weaker prior year comparatives
and also following successful initiatives to strengthen the product ranging
and pricing in Sofology and reintroducing 4 year interest free credit at
select times to maximise revenue and profit in this difficult trading
environment.

 

Whilst the economic outlook remains hard to predict we expect the widely
predicted lower inflation and interest rate environment to have a positive
impact on upholstery market demand levels with the declines experienced across
the last three years starting to reverse and the market slowly recovering in
our FY25 period. We are well placed to capitalise on any market recovery given
our market leadership position, the operational leverage in the business and
the progress we are making on our cost base.

 

Enquiries:

 

DFS (enquiries via Teneo)

Tim Stacey (Group CEO)

John Fallon (Group CFO)

Phil Hutchinson (Investor Relations)

investor.relations@dfs.co.uk

 

Teneo

James Macey-White

Jessica Reid

Ayo Sangobowale

+44 (0)20 7353 4200

85fs.dfs@teneo.com

 

About DFS Furniture plc

The Group is the clear market-leading retailer of living room furniture in the
United Kingdom. Our Group purpose is to bring great design and comfort into
every living room, in an affordable, responsible and sustainable manner. We
operate an integrated physical and digital retail network of living room
furniture showrooms and websites in the United Kingdom and Republic of
Ireland, trading through our leading brands, DFS and Sofology. We attract
customers through our targeted and national marketing activities and our
reputation for high quality products and service, breadth of product offer and
favourable consumer financing options. We fulfil orders for our exclusive
product ranges through our own UK finished goods factories, and through
manufacturing partners located in the UK, Europe and Far East, and delivered
with care through our expert final-mile delivery service "The Sofa Delivery
Company Limited".

 

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