This year has been tough for many in the UK. Both consumers and retailers have been hit by rising costs of commodities such as gas and electricity, along with a fluctuating rate of inflation and pay freezes lowering the average household’s disposable income.
While this has meant that many people have cut down on luxuries such as foreign holidays, it does not necessarily mean that consumers have called a halt on spending entirely. With less people jetting off this year, and a dismal summer in terms of weather trapping people in their houses for much of the season, the focus of many home owners has been firmly fixed on home improvements and furnishings.
This, of course, is good news for companies such as DFS, who have released a successful set of sales figures this week for the year ending on the 28th July 2012.
Many retailers in the current economic climate are struggling to remain afloat, as the four years of the double dip recession are beginning to take their toll on the high street. Popular brands such as Clinton Cards, Peacocks and the GAME Group have been forced into administration, along with many others, in 2012 alone.
However, DFS has bucked the trend of poorly performing retailers, posting a record EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) of £82 million. This is a 2.5 per cent increase on earnings made in 2011, which totalled £80 million.
Even more impressive is the fact that this year’s EBITDA has to take a £5.9 million retail and manufacturing expansion cost into account – whereas in 2011, the company decided not to channel funds into expansion at all. Many retailers, in fact, made a similar decision last year, as the market then was considerably less stable than it has been in the past twelve months.
Although sales shrank by 2.1 per cent, from £638.4 million in 2011 to £624.7 million this year, this is partly due to a slow start in the first half. Sales increased by 6.6 per cent in the second half alone, partially making up for a 10.3 per cent decrease in the first six months.
CEO Ian Filby spoke of the company’s performance, saying; “We are pleased to have delivered a good result for the year, despite the tough trading environment.
“Our record EBITDA of £82.0 million, up 2.5 per cent, was despite the impact of £5.9 million of non-recurring investment, comprising £5.0 million in new store pre-opening and launch costs, £0.5 million associated with the expansion of our UK manufacturing capacity by adding further production shifts at two of our factories, and £0.4 million in website enhancement.”
DFS also kept their expansion strategy well on track, adding to their commercial property portfolio in the UK and Ireland by opening a further 13 stores. This included their first store outside of the UK, based in Dublin, and their first city centre branch located on Tottenham Court Road in London. The new stores all proved to be profitable and performed well throughout the year, contributing to the impressive EBITDA.
The new stores and factory expansions allowed DFS to create 500 new roles in retailing and manufacturing, bringing employment to some of the areas in the UK with high unemployment rates.
Mr Filby continued; “Since the beginning of our new financial year we have opened one further new store and our expansion plan is firmly on track as we develop our future store opening pipeline, while also enhancing our successful and growing online business.
“We are delighted that we are creating some 500 new jobs through our retail and manufacturing expansion, and have been pleased by strong demand for these positions.
“The strength of our performance, under exceptionally testing market conditions, is a testament to the hard work and commitment of the whole DFS team.”
It remains to be seen whether DFS will continue to go from strength to strength in this financial year, but with Christmas approaching and inflation gradually dropping, more consumers are expected to relax their spending habits in the new year. Hopefully, this will mean that the British retailing giants will be able to post a new record EBITDA this time next year as well.
Mr Filby certainly seems optimistic about the near future for DFS, concluding; “We remain confident in the future prospects for DFS based on our clear strategy, excellent products and outstanding people, and our expanding store and online presence.”
Do you think that home furnishing chains such as DFS will have a successful year in 2013? Have you given up foreign holidays and other luxuries since the start of the recession in order to make home improvements? Let us know your thoughts in the comments section below.
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