Furniture seller DFS has warned profits are likely to be well below expectations amid continued weak demand and supply issues.
The Doncaster-based chain, which has around 118 showrooms across the country, issued the warning to investors on the London Stock Exchange, saying that pre-tax profits were likely to fall between £10m-£12m, rather than the £20m-£25m range it gave in interim results issued in March. Bosses cautioned that revenues, which had expected to be between £1bn-£1.01bn, are now anticipated to be somewhere between £995m-£1bn.
The downbeat assessment came as DFS cited waning demand for big ticket upholstery items and the Red Sea supply routing issues caused by attacks on ships in the region. Disruption has pushed £12m-£14m of delayed deliveries to the firm’s 2025 financial year.
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To avoid the attacks, some shipping companies have diverted their vessels around the Cape of Good Hope – a route that takes an extra 10 days, on average. DFS said there had also been higher shipping costs as a result of freight rates increasing above previous expectations in its fourth quarter.
Bosses said the demand issues were met with some measures to boost orders, but the overall demand in the upholstery sector declined by around 10% in volume terms year-on-year from a weak starting point. The drop has made for record lows.
Despite the headwinds DFS said it had continued to grow its full year gross margin rate and dial down operating costs, which are expected to be down by about £25m year-on-year. Those gains were said to have mitigated some of the impact of lower sales.
The company said: “We have been encouraged by an improving trend in our group order intake, which is up over +9% in our fourth quarter to date, in line with our expectations. The recent improvement comes as we annualise weaker prior year comparatives and also following successful initiatives to strengthen the product ranging and pricing in Sofology and reintroducing four-year interest free credit at select times to maximise revenue and profit in this difficult trading environment.
“Whilst the economic outlook remains hard to predict we expect the widely predicted lower inflation and interest rate environment to have a positive impact on upholstery market demand levels with the declines experienced across the last three years starting to reverse and the market slowly recovering in our FY25 period. We are well placed to capitalise on any market recovery given our market leadership position, the operational leverage in the business and the progress we are making on our cost base.”
Original artice – https://business-live.co.uk/all-about/yorkshire-humber
