- DFS Furniture now forecasts its half-year profits to be around £16m-£17m
- Tim Stacey, CEO of DFS, said the furniture market ‘remains relatively subdued’
DFS expects to almost double profits in the first half, but the retailer forecasts ‘subdued’ demand ahead as well as extra costs related to the Autumn Budget.
The furniture specialist now forecasts profits for the six months ending 29 December to be around £16million to £17million, a gain of between £7million and £8million on the same period last year.
It said earnings growth was boosted by higher sales, operating cost savings, and a better gross margin offsetting inflationary rises.
Against a more challenging trading backdrop, DFS’s order intake jumped by 10.1 per cent, with its Sofology business recording a 19.1 per cent surge.
However, the Doncaster-based company expects delivered sales to only expand by 1.4 per cent owing to delays caused by the Red Sea Crisis.
Houthi militant attacks on vessels travelling through the Suez Canal have forced many cargo operators to take longer journeys around South Africa’s Cape of Good Hope.
Mixed update: DFS anticipates its first-half profits almost doubling but cautioned of increased costs related to the recent Autumn Budget
DFS has subsequently seen its transportation costs soar and millions of pounds of deliveries delayed.
The London-listed firm also warned of growing operational costs in the second half of the financial year due to higher-than-expected interest rate payments and changes announced in the October Budget.
From April, employers’ National Insurance contributions will go up from 13.8 per cent on salaries exceeding £9,100 to 15 per cent on wages above £5,000, and the National Living Wage will increase by 6.7 per cent to £12.21 per hour.
Since these measures were unveiled, many retailers have axed jobs while the UK economy has flatlined and retail sales have suffered a challenging ‘Golden Quarter.’
As a result, DFS said it had a ‘cautious view’ on market demand and expects profits to be weighted towards the first half of the 2025 financial year.
Tim Stacey, chief executive of DFS, acknowledged that the furniture market ‘remains relatively subdued.’
But he said DFS was ‘cautiously optimistic despite the increased inflationary pressures and less positive market outlook for 2025.’
Stacey added: ‘Looking forward, we are confident that the group is well positioned to drive attractive returns for shareholders as the market recovers.’
Britain’s homewares sector has suffered moderating trade in recent years as mortgage rate hikes have dampened the level of home purchases and exacerbated cost-of-living problems.
DFS axed its dividend after swinging to a £1.7million pre-tax loss last year following ‘record low’ market demand.
Its recovery will partially depend on how many base rate cuts the Bank of England makes this year, having made just two 0.25 percentage point reductions in 2024.
Dan Coatsworth, an investment analyst at AJ Bell, said: ‘A sofa is an expensive purchase for most households, so the likes of DFS need people to be feeling confident about their finances and for there to be a healthy property market in order to be confident on demand.
‘If that isn’t the case, households might be tempted to stick with their old suite even if it is starting to look a bit tired and worn.’
DFS Furniture shares were 1.3 per cent down at 139.8p on late Friday morning, but have grown by around a quarter over the last year.
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