DFS upmarket link-up bringing in the more affluent customer

The group reported a one per cent increase in annual like-for-like sales in the six months to January 26 despite very tough markets.

New store openings resulted in a 10 per cent increase in earnings to £31m.

DFS chief executive Ian Filby said: “Like-for-like sales growth of just over one per cent in the current environment is highly encouraging. We have got a very clear strategy of what we’re doing in a tough market. The sofa market is down 10 per cent over the last 10 years.”

He said that the group’s new advertising campaign, which focuses on the sofa as being the heart of the home rather than on price promotions is paying off.

In addition, the product partnership with Country Living and House Beautiful has introduced the retailer to a completely different, more upmarket demographic.

“It’s a great partnership. We have helped them develop exclusive ranges,” said Mr Filby.

“It’s going really well. The fact that we put five models in stores nationwide shows it’s a highly successful initiative.”

He said that the magazine sofa models appeal to “quality seekers”.

“In the past we’ve under-indexed with that group. It’s a continuing source of growth for us, but we’re just as keen to ensure we’re not losing ground with traditional customers.”

The group is keen to maintain its value for money roots.

The ‘House Beautiful Collection’ and ‘Country Living Furniture’ ranges have been endorsed by the editors’ of both magazines – both of which have high ABC1 readerships.

Susy Smith, the editor of Country Living, said: “DFS is the perfect retailer for our treasured designs. With their 40-year heritage, DFS values great design and quality furniture just as much as we do at Country Living.” The Country Living collection, which includes The Loch Leven, St Ives and The Gower, was inspired by the British and Irish countryside.

The House Beautiful range is more European, with names like Casa Mila, The Bauhaus and Villa Savoye. The furniture is only available at DFS.

Group sales rose eight per cent to £319m in the 26 weeks to January 26 following three new store openings.

DFS invested a further £1.3m in the expansion of the business, principally in new store pre-opening and launch costs.

The group has invested £2m in training all of its employees as part of a major investment programme.

“When times are tough most retailers chip away at staff training,” said Mr Filby.

He said he was very encouraged by the group’s multi-million pound investment in the internet.

“We’re relaunching the site at the back end of the summer. We now have a really successful room and sofa planner. You can plan a specific room and drop the sofa in,” he said.

There is also a sofa and room planner app.

Some 80 per cent of customers go online before coming into a store.

“People are much better informed. They do their homework beforehand.”

He estimated that very few people, less than 10 per cent, buy directly from the web without trying out the sofa.

“Most people are quite wise to sit in a product they are going to have to live with,” he said.

The group is highly cash generative.

During the half year it paid a £17.0m dividend to shareholders, followed by a further £19.5m to complete the redemption of 10 per cent of its outstanding bonds.

After this total outflow of £36.5m, cash balances at the end of the half year stood at £22.0m.

The group completed a refinancing of the business through a £310m bond issue earlier this month. DFS has launched a new advertising campaign which shows various couples, friends and notably families with children who see their sofa as the heart of the home.

While price deals play a part, they are no longer the sole message.

With an advertising budget of just under £100m a year, DFS is the third biggest retail advertiser behind Tesco and Asda.

Mr Filby believes the change in people’s perceptions to DFS will be gradual.

“We are aiming to attract people who wouldn’t have visited a DFS before.

“We’re gently trying to change people’s perceptions, but we will need to work at it for three or four years,” he said.

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