DFS warns on profits after demand weakens 'significantly'

DFS cut its FY24 profit and revenue guidance on Tuesday as it said market demand has weakened "significantly" over the last two months following a solid start to January.

The furniture retailer said market order volumes are down around 16% year-on-year across January and February. As a result, it now expects revenue of between £1bn and £1.02bn for the year, while pre-tax profit is expected to be between £20m and £25m. This represents a £60m to £65m reduction in revenue and a £10m reduction in pre-tax profit.

Guidance excludes the risk of Red Sea delays, which DFS said it continues to monitor closely.

The company also warned that if Red Sea issues continue through to its year end, potential delivery delays could result in up to £4m of profit being deferred into the following financial year.

In its results for the 26 weeks to 24 December 2023, DFS said revenue fell 7.2% to £505.1m, with gross sales 5.6% lower at £666.2m.

Underlying pre-tax profit was up £1.6m on the same period a year earlier at £8.7m, but reported pre-tax profit fell to £0.9m from £6.8m.

DFS hailed a "resilient" underlying performance despite weaker-than-expected market demand.

"Market demand in the period was weaker than the assumption we had used in preparing our profit guidance at the start of the year and we believe market order volumes are currently at record low levels," it said. "The group has, however, continued to increase market share whilst improving gross margins and reducing operating costs, which has enabled us to report year on year underlying profit growth."

Chief executive Tim Stacey said: "We remain confident in both our long-term growth strategy and the capability to deliver on our objectives.

"We remain well positioned to improve our profit margins without market recovery and remain confident in delivering our 8% PBT target when the market recovers."