DFS reduces profit forecast due to weak demand and supply delays

DFS’ profits are being affected by the Red Sea disruption and slow demand for large-ticket purchases.

The sofa retailer warned that it would have lower profits than expected due to “weak upholstery markets” and delays in deliveries of up to £14million, which will now last until next year.

Analysts warned that the UK economy was “unplayable”. The shares of this London-listed firm fell by 2 1/4p or 2 percent to close at 1101/2p.

DFS informed investors that the demand for sofas has declined by around 10% and that shipping costs have also increased. It expects to achieve a profit before tax between £10 and £12 millions. had hoped would come in between £20 and £25 millions.

The revenue for 2024 is now expected to fall between £995 Million and £1 Billion, down from the previous guidance of £1 Billion to £1.015 Billion in March. DFS cut its previous guidance in March, warning that demand has “weakened significantly”.

Peel Hunt analysts said the lower forecast would not surprise anyone.

The company added, “We think there’s a great opportunity here, and others are going to feel the pain much more than DFS at this time.” The upholstery retailers continue to face a difficult situation, as the cost pressures and hard selling conditions are compounded.

DFS reported a 9 percent increase in orders for the fourth quarter. It also said its market share remained at an all-time high of 38.5%. The company reported that it continued to grow its gross margin for the full year. The company has reduced its operating expenses, which are expected to drop by around £25 million per year.

DFS stated in a press release: “While the economic outlook is difficult to predict, we expect that the lower inflation and interest rates predicted by many will have a positive impacton the upholstery market demand level. The declines seen over the past three years are starting to reverse, and the market will slowly recover during our 2025 fiscal year.

We are well-positioned to capitalize on any market recovery, given our leadership position in the market, our operational leverage and our progress on cost base.

Jefferies analysts said that they expected a recovery in DFS’s next financial year and that the company had a “clear strategy to drive growth” through developing its ranges, and renovating its stores.

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