Interview: DFS boss Ian Filby on life after a much-hyped float

Sitting in DFS’s new small-format store in Westfield, the retailer’s affable boss Ian Filby seems a man at ease with City expectations.

Before its IPO in March the speculative hype was that DFS would have an enterprise value of £1bn. In reality its market capitalisation was £543.2m, resulting in an enterprise value shy of £800m, as it set its share price at the lower end of the marketed range.

DFS’s shares have edged up since then and the City appears to be happy with progress.

Last week the sofa giant revealed its sales for the second half, which were in line with expectations. It reported gross sales rose 4% year on year against “more demanding comparatives and the extra trading week last year”.

“We are satisfied with our sales growth – the words ‘on plan’ are the appropriate ones,” says Filby. He insists he is “still smiling” despite the pressures of running a public company and says he even enjoyed the dreaded first meeting with analysts.

Filby has however had to curtail his mountaineering as a result of work pressures. Gone are the days of climbing the Himalayas and trekking in the Arctic circle.

But apart from that, the transition to a listed company has not been too much of a culture shock because of the retailer’s previous structure.

“We have had a bond since July 2010 and we set ourselves up to have the feel of a public company,” he says.

The right chemistry

DFS owner Advent International installed former Boots trading director Filby as chief executive shortly after acquiring the company from legendary founder Lord Kirkham.

Filby spent 29 years at Boots and maintains his decision to join the pharmacist had nothing to do with him studying organic chemistry at Cambridge.

“I inherited a fantastic company and I’m not in any way trying to pretend that this is a turnaround”

Ian Filby, DFS

Since taking the helm at DFS he has overseen an expansion of the estate by around 30 stores, a focus on efficiencies, a brand repositioning and an international launch.

“I inherited a fantastic company and I’m not in any way trying to pretend that this is a turnaround,” says Filby.

“For the company the last five years has been a great success story that will allow us to move from a great British company to a world-class retailer.”

New initiatives

Filby is quick to make it clear that the words “world-class” do not mean the business will be pursuing aggressive overseas expansion any time soon.

Instead the retailer is undertaking a measured international rollout.

The business moved beyond the UK and Ireland for the first time in November when it launched a store in Cruquius in the Netherlands and it is poised to open two more branches in the country in the coming year.

Other new initiatives include an impending trial of shop-in-shops.

DFS will test installing its Sofa Workshop and Dwell fascias, acquired in October 2013 and August 2014 respectively, as concessions across some of its stores in September.

The retailer has freed up significant space by consolidating its in-store warehouses in three or four nearby stores to one large hub store.

Filby says 75% of DFS’s 106 stores have 3,000 sq ft to 5,000 sq ft of space that could be released by this initiative.

In an increasingly multichannel world in which consumers are migrating online even for big-ticket items, DFS is also experimenting with a digitally enhanced small-store format.

Mid-interview Filby asks a colleague in the Westfield store to demonstrate how DFS is using technology to make the most of the small footprint.

A giant interactive screen controlled by a tablet-wielding sales assistant is put into action, displaying the full product range to customers.

Online sales

Filby says web sales now make up a “pretty significant chunk of sales”. He will not be drawn on how big a proportion it now comprises, but does reveal DFS’s online sales make up 28% of the total online sofa market in the UK.

“I feel British retail is being stifled by business rates”

Ian Filby

When asked if the move to smaller stores is also a reaction to the spiralling costs of business rates, Filby concedes such concerns do play a factor.

“The locations we can open in is a function of the rent and rates. I feel British retail is being stifled by business rates,” says Filby.

Shortly before the interview it emerged that DFS-owned Sofa Workshop won a legal fight against rival retailer Sofaworks, which led to the latter changing its name.

Combative Sofaworks boss Jason Tyldesley argued the legal case was born out of DFS’s fear of his company’s business model.

“We have put a stake in the ground in the last 12 months to change the [furniture] market by putting an end to endless Sales, which is what the whole market lives and thrives on,” said Tyldesley. “To be honest, that is what our competitors like DFS fear and I think this [legal] case is born out of that fear.”

Marketing shift

While Filby refuses to comment on the court case specifically, he refutes the suggestion that DFS is guilty of “endless Sales”.

“There’s a little joke about the DFS Sale but we are on Sale less than a lot of our competitors,” says Filby.

DFS is placing less emphasis on Sales in its marketing and is changing its messaging to be more feminine and to appeal to young families.

DFS’s relationship with ad agency Krow led to an unexpected sponsorship for a retailer that specialises in getting customers comfortable while sitting down, when DFS signed up as a partner of the British Olympic Association for Next year’s Rio Olympics.

Filby explains the sponsorship came about on the strength of advice offered by Krow, which is working with Team GB for Rio 2016.

The trust Filby places in others – including his business partners – is symptomatic of his gregarious personality and has led to him becoming one of the best-liked chief executives in retail.

However, it is one thing winning over retail peers and another thing keeping shareholders happy. It will be long and hard slog, but Filby has made a solid start. To borrow a pun, it is a case of ‘sofa so good’ for Filby.