Image copyright DFS

Sofa and living room furniture specialist DFS has reported a fall in both sales and pre-tax profits for the six months to 27 January amid "challenging market conditions".

The firm said revenue before acquisitions was down by 3.5% to £366.5m, on profits 58.1% lower at £7m.

But when the group's recent acquisition of the Sofology chain was taken into account, revenues were 4.3% higher.

The company added that more recent performance had improved.

Its shares rose by 6% following the release of its results.

DFS, which owns the Sofa Workshop and Dwell brands as well, also has brand partnerships with French Connection and House Beautiful.

In December, DFS Furniture paid £1.2m for store leases and other assets from failed rival Multiyork, which went into administration in late November blaming difficult trading conditions.

DFS chief executive Ian Filby said: "We have seen a strengthening trading performance across the first half of the financial year and through February into March.

"We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in EBITDA and generate strong cashflow across this financial year, in line with our expectations."

The overall increase in group revenues, which rose to £396.1m, up from 379.9m, reflected "increasing scale and relative market leadership following the recent acquisition of Sofology", the company said.

'Bad place'

The High Street has come under pressure in recent months in the face of increased import costs, reduced consumer spending, online competition and higher overheads including wages and business rates.

As a result, some retailers, including Multiyork and Toys R Us, have failed, while others have closed outlets and cut jobs.

Neil Wilson, senior market analyst with ETX Capital, said the market was in a "bad place" despite recent "encouraging signs".

However, he added: "Broadly speaking, DFS is managing to handle the broader downturn in retail pretty well.

"The collapse of Feather & Black, Warren Evans and Multiyork, whose assets DFS has acquired, served to indicate the severe pressure on the market and the opportunity for those with enough scale to see it out."

But DFS was on track to deliver modest earnings growth and strong cash generation this year, he added, helped by the acquisition of Solofogy and "scale, flexibility and the vertically integrated business model".

"The failure of rivals should no doubt also support growth in sales and market share," he added.