DFS issues profit warning amid ‘weaker market demand’ and potential Red Sea impact

The sofa retailer posted underlying profit before tax of £8.7m for the 26 weeks to December 24, 2023. Profit before tax on a reported basis dropped year on year from £6.8m to £900k.

DFS posted revenues of £505.1m for the period, down 7.2% year on year from £544.5m.

The retailer noted that despite a “more challenging and volatile than expected upholstery market”, DFS has continued to gain market share which it credited to the “strength” of its brand portfolio.

Despite this, order volumes were down around 10% during the period.

DFS said it is monitoring closely the ongoing Red Sea attacks and said that if the Red Sea issues continue, potential delivery delays could cause up to £4m profit being “deferred” to the next financial year.

The retailer now expects revenues to be in the range of £1bn and £1.01bn, reflecting a £60m to £65m reduction to its revenue guidance.

Profit before tax is now expected to fall between £20m and £25m, down £10m from the previously pledged £30m to £35m.

Resilent performance

DFS chief executive Tim Stacey said: “I want to thank our colleagues for their dedication toward providing a first class service to our customers. While the current macroeconomic situation has presented many challenges, we are pleased to have extended our market leadership while reporting a resilient profit performance through the first half.

“As a result of weaker market demand, we have lowered our FY24 profit guidance to £20 to £25m, excluding the potential risk of Red Sea delays which we continue to monitor closely. This reflects revenue guidance reducing by £60 to 65m, partially mitigated by good progress on our Cost to Operate programme.

“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.”