Sunday Long Reads: Planet Hollywood, Autocratic Democracy, Nuclear is another word for gas, Ruth Madoff, Terrible Canadian schools
DFS Furniture (DFS) has updated that “after careful consideration, we have decided to sell Sofa Workshop to Halo… Following the disposal, the group will benefit from the reduction in the cash costs of funding Sofa Workshop's operating losses, elimination of the potential volatility in the profitability generated and it will allow the group to focus on executing the significant value creation opportunities in its core activities”...
Back in mid-July I noted about the sofa stock DFS Furniture (DFS) that 'investors can do so much better than this one'. This was driven by the view that 'a world of more WFH might well be correlated with an uptick in sofa time in front of the TV, but it is not helped by higher unemployment or an enhanced difficulty in paying back those monthly charges on those oh-so-easy-to-obtain four year interest free credit deals'. Well blow me down…DFS has only gone and upped its hopes...
If you read everything but the first couple of lines of today’s trading update from DFS Furniture (DFS) for its year to the end of June, you might think that everything was kind of workable for the sofa company. Apparently online order intake is up 77% year-on-year between the 23rd March and the 12th July, whilst in the physical showrooms - post re-opening - demand was up 69% between 1st June and 12th July. Sofa frenzy! Of course though, the reality is captured in those first two lines of the update...
There is raising money to survive (see the regulatory update today from Aston Martin Lagonda (AML)), there is raising money to underpin growth opportunities (see my write-up on Abcam (ABC) a couple of weeks ago) and there is raising money because you are a cyclical business and need to build a buffer. The latter category is going to be the majority of names which raise money over the next six or twelve months…and this includes sofa company DFS Furniture (DFS), which states today that 'the Company is preparing for a possible non pre-emptive equity issue of up to 19.9% of its existing ordinary share capital'...
Over fifteen years ago I think to remember going to my local DFS (DFS) and really irking the salespeople by paying for my sofa upfront and in full. Clearly I am financial illiterate as I should have taken up the four years free finance and whatever other inducements were thrown at me at the time...but regular readers will know I am no fan of debt at any level.
Following a June profit warning which saw them down to 200p, shares in DFS Furniture (DFS) had recovered to above 230p. They are currently though back below 220p on a “Post-Close Trading Update”…
A “Trading Update” announcement from DFS Furniture (DFS) includes that “we believe our expectations for the next financial year are realistic”. The shares are though currently more than 20% lower at around 200p, with the announcement also updating that “the trading environment has however recently weakened beyond our expectation, with significant declines in store footfall leading to a material reduction in customer orders”. Uh oh…
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