DFS Furniture cuts annual profit outlook

In the 26 weeks to 25 December 2022, underlying pre-tax profit fell 16.2% to £7.1m, while reported pre-tax profit was down 16% at £6.8m. Revenues declined by 2.2% to £544.5m. DFS cited a "weak environment", particularly in the first quarter, as discretionary spending was hit by the cost-of-living crisis.

The retailer said that following strong second-quarter trading, momentum continued through the important winter sales trading period. However, due to a softening in order intake in recent weeks, it now expects full-year profit of £30m to £35m, towards the lower end of its previous guidance but in line with external expectations.

Chief executive Tim Stacey said: "Profit margins have reduced over the last year due to a combination of significant cost increases and our commercial strategy to ensure that we continued to offer great value for customers in an environment where consumer discretionary spend was under pressure.

"We have however improved our gross margins in the first half of this year from H2 of FY22 and further still in the second half to date through product innovation and selected retail price increases. Cost headwinds are reducing and in some cases reversing and we expect our upward gross margin trajectory to continue as we execute our margin build back plan."

At 0930 GMT, the shares were down 3.8% at 128p.