DFS launches new compact store format to expand in small towns

The UK’s largest sofa specialist has opened a 10,000 sq ft store in Stirling, around half the size of the average DFS store, which covers between 15,000 – 20,000 sq ft.

DFS chief executive Ian Filby said the 97-store retailer is looking at “how tight we can get our model”.

“It’s the smallest store we’ve got,” said Filby. “It taught us we can condense our current model into a new smaller format.”

Filby said the store generates just a “small percentage of sales” less than the average, larger DFS shop. “It’s a good solution for us in smaller towns,” he said.

However, he added DFS would not be opening swathes of smaller shops because larger towns demand more store space. “You have to bear in mind the customer traffic,” he said.

Filby spoke as the retailer unveiled an EBITDA rise of 8.5% to £48.3m in the nine months to April 27. Sales were up 7.8% to £481.8m. Like-for-likes were in “positive” territory, said Filby.

“The market is pretty tough so to show growth is pleasing,” said Filby. “We’re enjoying the upside of more stores. The new stores are bang on expectations.”

Filby said DFS, famous for investing huge amounts on advertising, is benefiting from getting more bang for its buck on marketing. “We’ve done more marketing than DFS has ever done,” said Filby, adding that the retailer is not spending more but is buying more efficiently.

“We’re hitting more eyeballs and eardrums, with radio, internet and broadcast. You can be smart around targeting different groups of customers,” he said.

DFS is replatforming its website this year, which will improve the customer experience and allow more interactive content such as videos. Filby said he views the internet as a marketing channel rather that a buying channel. “My web business is my live magazine, to inspire people to come into stores,” he said.

Filby remained cautiously optimistic on the outlook. “Nothing has particularly changed about the tough market and our position in it. It’s steady as she goes going into the next quarter. 2013 as a market is as tough as 2012.”

He added that Government initiatives to ignite the housing market - such as its Help to Buy scheme - “might put a little bit of helpful impetus” into the mortgage market, but that would not be felt at DFS until 2014. “I’m not holding my breath for a massive surge,” he added.