Furniture retailer DFS warned on Thursday that full-year profits would fall short of previous guidance as the ongoing cost of living crisis saw consumers tighten their belts throughout the fourth quarter.
DFS said underlying pre-tax profit before and brand amortisation for the twelve months ended 30 June was now expected to be only £57.0m-£62.0m, down from previous guidance of £66.0m-85.0m issued at the time of the group’s interims back in March. Full-year UK and Ireland revenues were predicted to be approximately £1.15bn-1.16bn.
The London-listed firm said the downgrade comes as the UK furniture market saw “a change in demand patterns”, with recent data from Barclaycard suggesting a roughly 2.1% reduction in transactions in April and the company witnessing “a similar change” in order volumes across.
DFS also noted that while it had increased weekly production and delivered revenues progressively over the second half of the year, hitting record levels in the fourth quarter, the ongoing Covid-19 linked supply-chain disruption, combined with lower order intake since April had led to lower levels of production and deliveries relative to previous expectations.
However, the group also expects to close the financial year with an order bank that is elevated by roughly £30.0m, or 2.5% of annual revenues relative to pre-pandemic levels, which it said will provide “some resilience” going into the 2023 financial year.
“It is difficult to forecast consumer behaviour over the next twelve months, but should the trends observed in April and May continue across FY23, this would broadly balance the volume benefit from the elevated opening order bank. Following the growth of the group in volume terms relative to pre-pandemic levels, we also believe that we have the opportunity to drive further cost efficiencies from our scale,” said DFS.
“However, our trading history shows that the group has gained market share during periods of furniture market decline, and we believe that we will remain well-positioned against the market, given our scale, brand strength, and our integrated retail strategy.”
As of 0855 BST, DFS shares had slumped 16.92% to 153.70p.
Reporting by Iain Gilbert at Sharecast.com
