DFS warns on profit after weaker demand and Red Sea disruption
DFS has issued a profit warning following “challenging” consumer demand and the impact of disruption in Red Sea shipping.
The upholstered furniture retailer now says its pre-tax profit for its 2024 financial year is expected to fall in the range of £10 million to £12 million compared to a previous guidance of £20 million to £25 million.
DFS said the reduction has been driven by a lower level of delivered customer orders, with £12 million to £14 million of delayed deliveries from the Red Sea disruption expected to move into FY25. The retailer has also been hit by higher shipping costs and a weak upholstery market.
Meanwhile, full year revenues are now expected to be in a range of £995 million to £1 billion compared to a previously guided range of £1 billion to £1.015 billion.
DFS said it has continued to grow its full year gross margin rate, despite higher shipping costs and investments to drive required order intake volumes in in its fourth quarter. In addition, it has reduced its operating costs which are expected to be down by around £25 million year-on-year.
Giving an update on recent trading and its outlook for the new financial year, DFS said it has been encouraged by an improving trend in its order intake, which is up over 9% in its fourth quarter.
Looking ahead, the company said: “Whilst the economic outlook remains hard to predict we expect the widely predicted lower inflation and interest rate environment to have a positive impact on upholstery market demand levels with the declines experienced across the last three years starting to reverse and the market slowly recovering in our FY25 period.
“We are well placed to capitalise on any market recovery given our market leadership position, the operational leverage in the business and the progress we are making on our cost base.”
