Shares in furniture retailer DFS (DFS) jumped to a 3-year high after the firm raised its earnings outlook. Strong H1 sales and an increase in margins mean profit for the year to June 2026 will top expectations.
| Share price: 199p (+6.6%) | PE: 13.5x |
| Market cap: £460m | Yield: 2.2% |
MAJOR EARNINGS UPGRADE
Sofa seller DFS said first-half sales were expected to be up around 9% on the previous year. As well as an ‘elevated’ order book at the start of the half, the firm saw ‘continued positive order intake’.
Both the DFS and Sofology brands registered growth in new orders against strong comparatives and a broadly flat market. In addition, the Winter sale trading period has started in line with the company’s expectations.
First half pre-tax profit is now seen between £30 million to £31 million, up more than 75% year-on-year. For the full year, profit is seen between £43 million and £50 million.
That represents an increase of between 43% and 66% on FY25 and compares with a consensus of £41 million.
Chief executive Tim Stacey said he was ‘confident the business is well positioned to continue delivering against our strategy’. Stacey also confirmed the group’s medium term targets of £1.4bn of revenue and an 8% pre-tax profit margin.
This is quite the upgrade from DFS, with full-year profit potentially 20% above the market forecast. When the firm talks about operating leverage, it’s clear from the numbers just how powerful it can be.
The macro and consumer outlook remains hard to predict, but the company appears to have a strong proposition. Orders continue to grow, and the firm has hinted about using data to target sales more accurately.
As well as a pleasing operating performance, the balance sheet looks to be in good shape. Net debt is down to around £60 million from £107 million, meaning leverage is just 0.8 times.
Read the press release here: https://www.dfscorporate.co.uk/investors/
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