Price cuts lop 35% from DFS income
Thursday 22 April 1999
Reporting a 35 per cent slump in first-half profits to pounds 12m, DFS said it had lowered prices to tempt in more shoppers. However, the markdown had a damaging effect on the value of like-for-like sales, which were down by 7.4 per cent in the period.
Underlying sales are still down by a similar amount in current trading, although Sir Graham Kirkham, the chairman, believes that lower interest rates might soon start to feed through to higher sales of sofas and other "big ticket" goods. "The people on the shop floor are reporting a better feeling. We think there is a bit more confidence out there," he said.
DFS moved to a more aggressive pricing policy a year ago while also reducing its reliance on interest-free credit. All this hit margins, which fell from 9.8 per cent to 8 per cent in the 12-month period.
DFS has also attempted to counter its image as a retailer of slightly frumpy, more traditional sofas. It has recruited new, younger buyers and the stores are stocking more modern, simpler designs. "We probably did get a bit too traditional," Sir Graham conceded.
The company will change some its television advertising to reflect the change. The irritating campaign using Jilly Foot and Tom Adams will be modified, and the pair will appear less often.
DFS shares have had a grim time. Despite rising 7p to 261p yesterday, they are way off their 1996 peak of 651.5p. But with 53 large stores the group has 13 per cent of the furnishings market, and a strong balance sheet with pounds 12m cash excluding the pounds 38m value-added tax refund currently being reviewed by the European courts.
On Investec Henderson Crosthwaite's full-year profit forecast of pounds 24.5m the shares trade on a below-sector forward multiple of 16. Given that the cycle may be on the turn, this looks reasonable value.
And why are 'southern' ways of speaking spreading north?
Rapper Ja Rule forced to deny leaving his wife for prison cell mate
Ten best places to live in the UK: Solihull comes top
Mysterious glowing ‘alien-like creature’ spotted in waters of Bristol Harbour. A jellyfish - or something fishy?
From 'terrorist' to tea with the Queen
Nelson Mandela death: his life in pictures
- 1 Cameron's freebie to apartheid South Africa
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 A forgotten episode in Russian history leaves links with the Philippines
- 4 Video: Students 'punched and dragged to the ground by their hair' as police break up demonstration
- 5 Cannabis can cause man boobs, US surgeon claims
iJobs Money & Business
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
£50000 - £70000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£70000 - £85000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£75000 - £85000 per annum + Bonus and Benefits: Harrington Starr: An award win...