More profitable than before the pandemic; however, supply chain issues persist.
DFS claims to assess the size of its post-pandemic operation and claims that it’s 15% more than it was before Covid-19. However, while profits and sales are significantly higher than their pre-pandemic levels, supply chain challenges make it clear that both are lower than that of the same time last year.
It states that 23.2 percent of its sales were on the internet in the first half of the year, an amount it believes to be the norm since most transactions were not subject to lockdowns. This is lower than 25.7 percent of online sales the year before and higher than 18.4 percent of transactions that took place online two years ago, the pre-pandemic year of 2019.
The retailer of upholstered furniture continues to invest into its online channels and the stores it has opened, including up new showrooms at Sofology – which are now 54, up from 42 earlier – and reviving existing DFS websites, beginning with its largest showrooms of 50 that include measures which reduce energy use.
DFS reported a profit of PS561.1m for the quarter ending December 26, 2021. It’s down 2% from the same period in 2017. However, it was up 15% over the same period two years ago.
Pre-tax profit was PS21.6m, down 70% from the year before, but 35.8 percent ahead of two years ago.
SUPPLY CHAIN CHALLENGES
The decline in pre-tax profits resulted from Supply chain issues related to Covid impacted margins and operating costs up to PS21m. Problems include:
- Long delivery times from suppliers.
- Disruptions of ports and containers.
The absences related to Covid-19 hit Sofa Delivery Company the hardest. Sofa Delivery Company hardest, with about 10% of its staff being off due to the disruption. They also spent more money on delivery in the timeframe. However, it admits that the customer experience for some customers did not meet expectations. DFS states that its costs increased by 6% in the period. However, that is compensated by an increase in the average value of transactions.
In the second quarter of this year, orders are increasing by double digits and are approximately PS175m more orders than in the same period two years ago. The retailer is expecting to exceed the pre-tax profits it had previously set.
DFS CEO Tim Stacey says the business increased market share during the first quarter of this year “despite significant logistics and supply chain challenges” and that the company’s expectations for profit for this year and the coming year remain unchanged due to the steady flow of orders. It believes it will make up for any disruptions to its logistics or manufacturing during the current year’s financial year.
Stacey states: “Looking forward, while the macro-economic climate remains uncertain, we are confident that our size, brand strength along with our integrated approach to retailing will lead to increases in the share of the market ahead of competitors. Our focus will remain on investing in digital showrooms, our platforms, our delivery networks, and our UK manufacturing capabilities in addition to expanding into other categories of home that we believe will increase long-term expansion and increase profitability.”
In the future, the retailer says it’s set for future growth that is profitable and will continue expansion into the bed and mattresses market, as well as into accessories for living rooms, to achieve a 4% part of the PS4.9bn market in 2026.
One of the most important aspects is its plan to establish a common technology infrastructure and source of information for all its brands. The Integrated Retail Intelligence System will combine more than 35 data sources to provide a 360-degree perspective of the company. The solution, which combines machine-learning-based decisions and process automation, will provide more market insight, enhance customer service and investment choices, and make Marketing more productive. The company’s internal Sofa Delivery Company will also assist in improving customers’ experience when they receive their delivery and reduce its operating expenses and carbon footprint. It is expanding its manufacturing capabilities in-house and sourcing exclusive ranges and brands. It will also develop central services for its brands.