DFS Furniture Plc (LON:DFS) said the furniture retail market is likely to remain challenging this year but its shares rose as it left its full year estimates unchanged and reported first-half sales growth.
Consumer confidence has weakened as higher inflation and stagnant wage growth reduce spending power.
DFS said it recognises this but continues to expect modest growth in underlying earnings (EBTIDA) for the year, driven by the annualisation of product margin and cost savings.
The company delivered a 4% increase in gross sales in the 26 weeks to January 27, boosted by the acquisition of Sofology and strong online demand.
READ: DFS Furniture and Sofology couch their differences over branding by agreeing takeover deal
Excluding sales of Sofology, however, gross sales dropped 3.5% on the previous year.
“With the like-for-like trading momentum for the group strengthening during the first half of the financial year, we continue to expect the second half of the financial year to demonstrate a stronger year-on-year gross sales trend than the first half,” the company said.
DFS has also completed the acquisition of eight showrooms, the brand and the intellectual property of Multiyork. The group expects the acquired stores, of which six will trade as Sofa Workshop, to open before Easter 2018.
READ: DFS Furniture reports 13% drop in underlying earnings, blaming "very challenging" markets
Shares rose 3.2% to 198.4p in morning trade.
“There is no doubt the market is in a bad place. But management is justified in stressing its ‘fundamental strengths in store sales densities, scale of operations, flexible cost base and vertically integrated business model’," said Neil Wilson, senior market analyst at ETX Capital.
"Moreover, as previously noted, the acquisition of Sofology offers good optionality and broadens the appeal of DFS, as well as strengthening its online/omnichannel offering. Competitors failing won’t hurt, either."