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DFS Furniture has said sales have soared as hours spent indoors during lockdown has unleashed pent-up demand for home makeovers, but the sofa retailer warned that unemployment and Brexit meant the outlook remained uncertain.
Its order value for sofa beds, tables and other furniture rose £70m year on year in the past six weeks, a jump of up to 40 per cent compared with the 15 per cent decline that the company had anticipated.
The demand, which the retailer said in its update on Tuesday was “significantly ahead of our initial expectations”, drove its share price up as much as 15 per cent.
“Consumers are spending so much time at home, even working, so they are investing in their homes rather than fashion or holidays,” Tim Stacey, the Doncaster-based company’s chief executive, told the Financial Times.
DFS, whose brands include Sofa Workshop and Sofology, said the unanticipated demand was expected to generate an extra £100m in revenues this year, with just under half translating into profits. The company would not break out online sales, but said they had been “strong”.
The peak in demand contrasts with woes across the wider retail industry, with many companies having been pushed into administration after shops were forced shut during lockdown and the pandemic hit demand.
DFS has not been unaffected, however. Last month it announced an undisclosed number of job cuts after the lockdown put a pause on furniture deliveries, driving the company to a loss before taxes of up to £58m.
Mr Stacey on Tuesday warned that the spending splurge on home redecoration could be in expectation of tougher times ahead.
“[People may be] wanting to buy products ahead of the autumn, which might be more challenging,” he said. Demand is hard to predict “from October onwards, when the furlough scheme comes to an end and potentially and unfortunately unemployment grows”. Brexit was another source of looming uncertainty, Mr Stacey said.
Analysts were, however, upbeat. Clive Black at Shore Capital called the results a “surprise”, adding that the spending on homes and gardens, alongside a sharp rise in ecommerce were “positive forces emerging from the coronavirus-impacted consumer economy”.
Jonathan Pritchard, analyst at Peel Hunt, expected DFS to upgrade its sales forecast as “customers are turning up in good numbers, not to browse, faff or procrastinate but to buy, and they are not being shy with [average order value] either”.
DFS, which lost £170m in orders during the 10 weeks of lockdown, has identified one opportunity presented by the pandemic. A mothballed plan to expand the number of Sofology stores has been revived, as the collapse of many rivals has left attractive sites open.
“We are hoping for a good deal with landlords,” Mr Stacey said, adding the company planned to open “a good few” new stores this year. Bricks-and-mortar was important for a furniture retailer, he said: “people want to sit on it before they buy it”.
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