Pent-up demand delivers strong first half for DFS

DFS Furniture reported a "resilient" first half on Tuesday and predicted trading would continue to strengthen as lockdown restrictions ease, boosting the shares.

The retailer, which specialises in upholstered and living room furniture, said revenues for the 26 weeks to 29 December rose 17% to £572.6m, with online revenues ahead 66.2% year-on-year. Pre-tax profits jumped from £15.9m to £72.1m.

The firm said: "The high demand levels experienced overall have driven material year-on-year revenue growth. A robust retail gross profit margin and good cost control, supported by the suspension of UK retail business rates, has resulted in significant profit growth."

Order intake in the first quarter was "particularly strong", it added, due to pent-up demand following the first national lockdown.

Chief executive Tim Stacey said: "Our business has proven to be resilient throughout the period, despite showroom closures and a significant amount of external disruption in our supply chain. The investments we’ve made in our digital channels have generated exceptional revenue growth."

Looking ahead to the rest of the year, he said the order bank was "well above" normal levels and final pre-tax profits were likely to come in around £105m.

"We expect to see a good level of activity in the home market as Covid-19 restrictions ease and, having accelerated the execution of our strategy and grown our market share, we are well set for future growth," Stacey added.

As at 1045 GMT, shares in DFS were ahead 7% at 246.0p.

Peel Hunt, which has a ‘buy’ recommendation and target price of 300p on the stock, said: "Today’s interims showcase a very strong half from DFS, and we find ourselves upgrading: 5% this year, to £105m, and 20% for outer years.

"The future is bright. These strong prospects are the outcomes of years of investment from DFS into its wide-reaching brands, its omni-channel offer and its uniquely integrated supply chain.

"DFS is highly cash generative and a return to the dividend list is around the corner, we believe."