DFS Furniture PLC - Trading Statement
● Revenues of c.
● As a consequence of the delivery suspension, profit before tax (pre IFRS 16 and brand amortisation) expected to be in the range of a
● The Group had been performing in line with expectations in March, until the lockdown, with order intake up in the second half year-on-year, and particularly strong in the DFS brand.
● All operations, other than our websites, were suspended on 23 March. All trading activities, including showrooms, manufacturing and distribution have resumed full operation.
● Accelerated online trading throughout both the lockdown period and since showrooms reopened with online order intake up 77% year-on-year from 23 March to 12 July.
● Order intake in showrooms following re-opening has been markedly above prior year comparatives, reflecting latent demand, with year-on-year growth of 69% between 1 June and 12 July.
● Solid financial position with a particularly strong opening order book for the next financial year that will generate an incremental revenue benefit of c.
*Year-on-year performance is measured against the 52 week pro forma period to
Prior to the impact of the COVID-19 pandemic, trading during the second half had been satisfactory, with our Group order intake up year-on-year, and particularly strong in the DFS brand.
As we recognise revenues upon the delivery of orders to our customers and due to the pause in deliveries for the majority of the final quarter, in order to comply with COVID-19 restrictions, FY20 revenues were down by
We have taken substantial cost and cash flow actions to protect the business in the face of this trading disruption. In particular, we have rephased marketing spend, agreed a reduction in senior management pay, secured rent deferral agreements with our landlords and reduced our discretionary operating costs. Government support through the retail business rates holiday and for the furlough of over 5,000 of our team members to protect employment levels has also partly offset the substantial losses that we have incurred due to the business suspension. Collectively, these actions allowed us to reduce our monthly cash operating costs in April and May to beneath
Profitability for the 52 weeks to
52 week pro forma period to
Gross profit reduction from
Operating cost base actions
Furlough of employees and rates relief
= (56 - 58)
Expected FY20 PBT
The health and wellbeing of customers and colleagues has been and always will be our priority. All operations, in line with government guidance, were paused on 23 March other than order taking on our websites and part of our small international business. We have ensured our colleagues have the appropriate personal protective equipment (PPE) and set up our operational locations in line with or ahead of Government guidance enabling us to restart selling, manufacturing and delivering our products in a safe manner.
Our showrooms were reopened in line with devolved government timelines. We trialled a small number of showroom openings from 22 May in
We believe that, given the large footprint of most of our retail showrooms, the current Government-imposed social distancing measures do not present a material barrier to order intake. Our manufacturing and final mile logistics activities are also fully operational having implemented a number of new working practices and safety measures as we work to produce and deliver orders and reduce our order book back down to normal levels.
Following the localised lockdown of the
Trading update and financial position
Order intake in our web channels increased significantly in the lockdown period benefitting from our well invested platforms and has remained strong since showrooms reopened, up 77% year-on-year from the start of the lockdown until 12 July.
We have also experienced very strong trading in stores since reopening with order intake up 69% year-on-year. We believe this performance materially benefited from latent demand from customers that would otherwise have completed purchases in late March, April or May and, given the wider economic uncertainty, we remain cautious on the outlook for demand.
In preparing for a challenging trading environment, we take some comfort from a materially higher opening order bank year-on-year, from which we expect to realise an incremental c.
Our strategy remains unchanged overall. We are, however, prioritising the core elements of our strategy: Accelerating our investment in technology and omni-channel initiatives in our largest brands, DFS and
We also continue to see the opportunity to grow the Sofology brand to around 70 showrooms. We have agreed a twelve month deferral of the opening dates of five previously secured new locations, in order to allow us to take immediate advantage of attractive units that may be vacated by distressed retailers on otherwise fully-occupied retail parks. We are currently in advanced discussions on a number of these locations.
Reflecting the challenging outlook for our market, we are taking necessary actions to preserve our future competitiveness. We have commenced an operational restructuring of
Recent trading has been very strong, boosted by latent demand which we have been able to capture as a result of our ongoing investment in our best-in-class online offering and a prompt resumption of our showroom operations. Despite the benefit of this exceptional recent trading performance and ongoing Government stimulus packages, we remain cautious on the outlook for the remainder of 2020 and into 2021, given likely lower consumer confidence and a potentially slower residential property market.
Whilst a weak trading environment would impact our short-term revenue and profits, we have historically prospered in economic downturns and gained market share. Furthermore, we believe that recent positive trading illustrates the resilience of the sofa replacement cycle over longer time frames and supports a view that the market can return to historical long-term growth rates in due course.
As the clear market leader with strong brand recognition, high showroom sales densities and advantageous vertical integration, we feel well-positioned in both the short and long-term to continue cash generation and drive shareholder returns.
"The events of the past few months have brought the best out of our Group, and I am very proud of our fantastic people who throughout this crisis have voluntarily supported the
"I also want to thank our many stakeholders for their firm support throughout this crisis from our shareholders, banks, supplier partners, our landlords, the Government and also the
"Our strong online platforms have served customers well throughout the lockdown and we have seen consistently high order intake, which I'm pleased to see has continued as our showrooms reopened. There is no doubt that consumer behaviours are changing fast and as such we are accelerating our omni-channel strategy through increased investment in technology right across the customer experience".
DFS (enquiries via Tulchan)
+44 (0)20 7353 4200
The Group is the clear market leading retailer of living room furniture in the
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Quick facts: DFS Furniture
Market Cap: £687.31 m
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