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DFS Furniture sees strong growth in underlying sales after latent demand, leaves full-year profit expectations unchanged

In a trading update for the five months to 30 December 2018, the sofas and furniture retailer reported underlying gross sales growth of 10% in spite of a challenging consumer environment
DFS saw like-for-like sales growth across all its brands – which includes Dwell and Sofa Workshop - and reported strong 22% growth in online gross sales

DFS Furniture Plc (LON:DFS) shares rose on Thursday after it reported strong growth in underlying sales, thanks to latent demand, and said its full-year profit expectations remain unchanged although it remains “mindful of the risk of near-term political and economic uncertainty”.         

In a trading update for the five-month trading period to 30 December 2018, the sofas and furniture retailer reported underlying gross sales growth of 10% in spite of a challenging consumer environment.

READ: DFS Furniture says annual profit dented by UK summer heatwave

It said it saw like-for-like sales growth across all its brands – which includes Dwell and Sofa Workshop - and reported a strong 22% growth in online gross sales.

Overall gross like-for-like sales growth in the period was 29%, including the acquisition of Sofology snapped up for £25mln in August 2017.

The firm said Sofology has maintained its solid underlying trading progress with good like-for-like growth and benefits from five successful new store openings since the start of the previous year. 

DFS said: “We believe our trading in this period has seen some benefits from orders placed by consumers who deferred their purchase decisions from the fourth quarter of the prior financial year, given the hot weather at that time.”

Mindful of broader political and economic uncertainty

The firm said, however, that although it achieved a good sales performance, helped by the latent demand, the group remains cautious around its full-year outlook hence its profit expectations remain unchanged.

It added: "We are mindful of the broader political and economic uncertainty and the further risk this may pose to consumer confidence and lead times for the proportion of our made-to-order products that we source overseas." 

The group said it will announce its interim results for the period ending 30 December 2018 on 14 March 2019.

Shares comfortably higher

In afternoon trading, DFS shares had pushed 3.2% higher to 211.50p after a fairly quiet start.

Patrick O'Brien, retail analyst at GlobalData commented: ‘‘DFS put out an unscheduled update this morning in the midst of Super Thursday’s results mayhem, but it was a reassuring one: strong group gross sales growth; positive like-for-like growth across all its brands; and importantly, it left full-year profit expectations unchanged.”

The analysts added; “DFS said that it believes it has recently benefited from orders placed by customers who deferred sofa purchases from the summer. While that sounds like positive news for the sector, DFS sounded out caution over the current economic and political uncertainty and said there was further risk to lead times on made-to-order products sourced overseas.

“That said, while most retailers, especially those focused on big-ticket items that can be easily delayed, fear a consumer downturn, DFS seems, if anything, to be relishing the prospect, stating that it ‘has historically capitalised on any adverse trading conditions’."

CFO succession plans

DFS also announced that after six years with the company, its chief financial officer, Nicola Bancroft has indicated her desire to retire from full-time executive roles.

The group said that, while a succession process is being conducted by the board, Mike Schmidt, currently its chief development officer, will become interim chief financial officer from 1 April 2019.

 -- Adds analyst comment, updates share price --

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