Jefferies Downgrades DFS Furniture, Cuts Target

Jefferies downgraded DFS Furniture (LSE: DFS) to Hold from Buy today, and the shares closed down 4.11%. The broker also cut its price target on the Doncaster-based sofa retailer, owner of the DFS and Sofology brands, to 156p from 210p.

DFS finished at 140p, against 146p at yesterday’s close, after trading between 139.5p and 144.5p. Volume of 437,024 shares was close to the five-day average of about 400,000, so the fall came on ordinary turnover.

Jefferies did not question the profit recovery. As reported by Sharecast, the broker said strong execution drove a further year of material profit recovery despite a tougher market. Its concern is what comes next: “However, with order intake remaining negative and consensus already assuming an inflection, we think the risk/reward profile has shifted lower.”

Jefferies also said the valuation looks less compelling once adjusted for cash rent, and that it is “awaiting the inflection”. No company announcement lay behind the move, and the shares fell on the day the downgrade appeared.

The execution it praised is visible in the full-year figures to the 28th of June. Underlying pre-tax profit rose 48.7% to £44.9m, and revenue reached £1.06bn from £1.03bn. The weak spot, order intake, was disclosed on the 24th of September: down 2.5% in the first 12 weeks of FY27, which DFS said was in line with expectations.

That makes the downgrade largely a reinterpretation of known information. Chief executive Tim Stacey said at the results: “We remain confident in our ability to outperform the market and deliver moderate profit growth in FY27, where we are comfortable with current analyst PBT forecasts.” Jefferies’ 156p target is 11.4% above today’s close.

Closes had held between 143p and 150p from late September until yesterday. At 140p the shares are about 15% below their late-August closing high of 165p, though not at a new low: they closed at 134p in mid-September.