DFS tumbles into the red but remains upbeat for the current year

DFS Furniture revealed it had swung to an annual loss after Covid-19 temporarily closed its operations – but said the current year had started strongly as consumers, after months spent at home, splashed out on new sofas.

The furniture manufacturer and retailer, which owns the DFS and Sofology brands, reported revenues for the year to 28 June of £724.5m, a fall of £271.1m on the comparable period a year earlier.

Underlying pre-tax losses prior to the adoption of IFRS16 were £56.8m, a £107m slump on 2019’s profits. Pre-tax losses were £74.9m, compared to 2019’s annual profit of £43.6m.

The retailer was hit when lockdown measures closed its showrooms, manufacturing and delivery capabilities for nearly three months during its peak spring trading period. Most staff were furloughed with only a small team left working remotely.

However, the group said it had seen strong demand online since March, which was then seen in showrooms once lockdown measures were eased, and that had continued into the current year.

Tim Stacey, chief executive, said: “While the reported decline in profit is undoubtedly disappointing in headline financial terms, a significant proportion of this profit has already been recovered in the current year as we resumed customer deliveries.

“The current year has started very strongly, with all showrooms now open and our digital channels continuing to growth. We believe that this growth is due to a combination of pent-up demand from lockdown [and] consumers spending relatively more on their homes.”

Greg Lawless, analyst at Shore Capital, said: “This is an upbeat statement from DFS. We like the fact that the company can leverage its market-leading position, vertical integration and has self-help levers to grow the business.”

Retail analyst Nick Bubb said: “The DFS finals are pretty ugly, given the impact of the lockdown on furniture deliveries. However, since the year-end, trading has bounced back very well.”