- DFS now anticipates underlying pre-tax profits of between £10m and £12m
- The Doncaster-based group also expects to report £995m to £1bn in revenues
DFS Furniture has made its second profit warning in three months amidst continued disruption in the Red Sea.
The sofa seller now anticipates underlying pre-tax profits of between £10million and £12million for the 53 weeks ending June, compared to prior guidance of £20million to £25million.
Alongside this, the Doncaster-based group expects to report £995million to £1billion in revenues, having previously guided for £1billion to £1.02billion.
Worse forecast: Sofa seller DFS has made its second profit warning in three months
Back in March, DFS reduced its forecasts owing to poor trade over the previous two months and the impact of the Red Sea crisis.
Houthi militant attacks have forced many vessels to avoid travelling through the Suez Canal and instead go around South Africa’s Cape of Good Hope, adding 10 to 14 days to journeys.
Consequently, DFS has seen its shipping costs soar and customer deliveries worth £12million to £14million delayed.
In addition, the company has been affected by consumer demand in the upholstery sector falling to record lows, with volumes down around 10 per cent year-on-year.
However, its fourth-quarter orders were 9 per cent higher, which the firm credited to weaker annualised comparatives, a better product range and pricing at its Sofology brand, and the reintroduction of 4-year interest-free credit deals.
DFS expects upholstery sales to recover as inflation and interest rates drop to more normalised levels relative to the last three years.
‘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,’ the business said.
Trading at DFS has slowed significantly since Covid-related restrictions ended, and the cost-of-living crisis discouraged purchases of big-ticket home items.
The AIM-listed firm, along with Wickes and B&Q owner Kingfisher, was a prominent pandemic winner, as the surge in working from home encouraged many Britons to upgrade their furniture.
Demand further benefited from a build-up of excess savings and the introduction of a temporary stamp duty holiday spurring sales of more spacious properties.
Analysts at Peel Hunt said: ‘Whilst life is doubtless very tough at the moment, DFS is still a fine business in our view, well managed with an enviable market position and plenty of routes to grow profit when the consumer turns.
‘It doubtless will, but for now, the shares may find the going a little tough. Once the signs of life emerge though, they will be strong performers.’
DFS Furniture shares fell 4.1 per cent to 108p on Wednesday morning, meaning they have slumped by around 64 per cent in the past three years.