Shares in DFS Furniture (DFS) have rallied 16% year-to-date to 163p, taking one-year gains to almost 50%, following an unexpected profit upgrade from the sofa seller and hopes the Bank of England’s interest rate cuts will boost big-ticket spending.

Green shoots of recovery are emerging at DFS, the UK’s living-room and upholstered furniture leader, which in March revealed adjusted pre-tax profit doubled to £17 million in the six months to December and raised its full-year guidance to £25 million to £29 million, comfortably above the £23 million consensus estimate.

Although Red Sea delays resulting in longer lead times meant first-half order growth didn’t translate into sales growth, with revenue softening by 0.1% to £504.5 million, this issue should be resolved in the second half.

‘Given our strong market position and relentless focus on executing our strategy, we are confident we will achieve our £1.4 billion full-year revenue and 8% profit before tax targets in the medium term and deliver strong returns for our shareholders,’ insisted chief executive Tim Stacey.

Investment bank Berenberg, which has a ‘Buy’ rating and 233p price target for DFS, said it finds the retailer ‘particularly interesting at this point in the cycle’ in view of its ‘high operational gearing and early recovery signals in the UK furniture market’. 

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