Furniture retailer DFS has swung to a loss, blaming ongoing shipping delays in the Red Sea and the effects of higher interest rates on borrowing.
In its preliminary results for the 53 weeks ending June 30, 2024, DFS reported a loss before tax of £1.7m, and a 65.7% drop in underlying profit before tax and amortisation to £10.5m.
Gross sales slumped 7.9% to £1.31bn, while revenues from continuing operations dropped 9.3% to £987.1m. Sliding sales were due in part to a 1.8% decrease year on year in the order intake, while Red Sea shipping delays deferred fourth-quarter sales.
DFS also said higher Bank of England rates increased the cost of providing interest-free credit.
In terms of the outlook, the company said its 2025 full-year trading to date is in line with expectations and it expects orders to jump to year-on-year growth in the first 12 weeks of the new financial year.
It also said it expects a “gradual market recovery over the course of the year” and for the group to grow profits “in line with market consensus” supported by “recent housing market recovery and real household disposable income growth”.
As a result, DFS is sticking with its targets of delivering £1.4bn in sales and 8% profit before tax in the medium-term.
Group chief executive Tim Stacey said: “I want to sincerely thank all our colleagues for their enthusiasm and continued commitment to delivering a great service to our customers in what has been a very challenging period for the group given the market conditions.
“Despite the challenges that the business has seen, we are optimistic for the future and see signs that market growth could soon return. We expect recent improvements in housing transaction data and strengthening consumer balance sheets to lead to increased upholstery market demand across the 2025 financial year. In addition, thanks to the success we have had growing our gross margin and improving our operational efficiency we expect to deliver profits in line with market consensus, weighted to the second half.
“It is clear that the upholstery market has a long road to recovery given the 20% decline on pre-pandemic levels that we have seen. Despite the challenges we have faced, we remain confident that the business is well-positioned to capitalise on market recovery. Given our strong market leadership position, the operational leverage in the business, our well-invested asset base and negative working capital cycle, we expect to deliver strong returns for our shareholders.”
No comments yet