DFS Furniture PLC (LSE:DFS) shares had the stuffing knocked out of them despite the retailer reporting that its first-half profits more than doubled, as it said footfall has softened in the second half.
Underlying pre-tax profit for the 26 weeks to 28 December 2025 rose 81% to £30.9 million compared to a year earlier, as revenue climbed 8.6% to £547.7 million.
Gross margin improved for the fourth consecutive year, reaching 57.8% and closing in on the group's 58% target. The improvement reflected falling freight costs, a more favourable dollar-to-sterling exchange rate, and the benefit of spreading fixed costs across a larger revenue base.
Net debt fell to £60.6 million from £116.7 million a year ago, and the group declared an interim dividend of 1p per share.
Chief executive Tim Stacey said the results were "reflective of our strengthening business," though he noted that footfall had softened since the half year, which was linked to bad weather and "delicately balanced" consumer confidence.
He said the board remained confident in achieving full-year pre-tax profit guidance of £43 million to £50 million, and remained on track for its medium-term targets of £1.4 billion in revenue and an 8% profit margin.
Broker Peel Hunt said investors will be "glad to see DFS join the dividend list", with cash generation strong and more returns "can be expected alongside deleveraging".
On the more recent trading, analysts noted that the second half has started slowly; "February was poor (weather) and geopolitics is causing nervousness among consumers. This year’s numbers are intact, but next year’s may reflect too much optimism, and so we downgrade by c.10%.
"However, DFS is in a strong mid- to long-term position and the shares are cheap, in our view."
** UPDATE: Adds share price and broker comment **