DFS warns of supply chain disruption despite annual sales and profits powering ahead

Sofa retailer DFS has seen its sales growth held back by material shortages and the Suez Canal blockage earlier this year.

The firm said it could have grown revenue even more than the 47 per cent it reported for the 12 months to the end of June if it were not for the ship that blocked the Suez Canal in March and shortages of raw materials.

The furniture chain said revenue had risen from £725 million in the last financial year to £1.1 billion in the most recent period. That is also up compared with two years ago, pre-Covid, when DFS revenue hit £996m.

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Despite the period running from July 2020 to June 2021 - taking into account much of the pandemic - it was the last three months that were the worst for this disruption.

Furniture chain DFS said revenue had risen from £725 million in the last financial year to £1.1 billion in the most recent period despite the disruption. Picture: Nick Ansell/PA

The firm told investors: "Our revenue growth in (the 2021 financial year) was however constrained by sector-wide pressures on supply chains from raw materials availability, container shipping delays (including the effects of disruption in the Suez Canal) and Covid-19 disruption of factory production, particularly in the final quarter of the year.”

Even with vaccine rollouts, DFS is still having to work differently to how it would prior to the pandemic.

And the company's customers appear to be less happy. Its established customer satisfaction score dropped from about 43 per cent in the 2020 financial year to just 31 per cent this time round.

"This June figure captures those customers most impacted by delivery delays caused by disruption to shipping as a result of Covid-19 and raw material supply," noted chief executive Tim Stacey.

He stressed that the post-purchase net promoter scores (NPS) for the DFS brand remained around their all-time high at 86.4 per cent.

Stacey added: "Performance throughout the year was particularly affected by shipping disruption from the Far East and raw materials supply issues relating primarily to foam availability in Europe.

"We have also faced internal and external manufacturing capacity and delivery constraints and cost inflation due to high levels of demand for our products."

The company added that it has started the new financial year with "strong trading momentum" and a large bank of orders.

"Whilst the high levels of demand are welcome, they do present substantial operational challenges for our supply chain and manufacturing teams to overcome," it said.

Pre-tax profit hit £99.2m in the 12 months to June, from a loss of £81.2m a year earlier, and 55.6 per cent higher than the same point in 2019.

Eleonora Dani, an analyst at brokerage Shore Capital, noted: “The [stock market statement] reminds us of the uncertain and challenging short-term operational environment, given well-reported logistics disruption, cost inflation pressures and unplanned Covid absences.

“DFS should have the right plans to mitigate these impacts, underpinned by its scale, operating experience and long-standing relationships.

“DFS remains a leading player in the growing upholstery market and has gained a 2 per cent market share over the period. This is a testament to the group’s strong brand awareness, well-positioned to capitalise on the significant consumer spending in 'home' categories.”

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