Home Money DFS on track to double profits, but furniture demand remains ‘moderate’

DFS on track to double profits, but furniture demand remains ‘moderate’

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Mixed update: DFS expects its first-half profit to nearly double, but warned of rising costs related to the recent fall budget.
  • DFS Furniture now forecasts its half-year profits to be between £16m and £17m
  • Tim Stacey, chief executive of DFS, said the furniture market “remains relatively subdued”

DFS expects to almost double its profits in the first half, but the retailer expects “moderate” demand going forward, as well as additional costs related to the autumn budget.

The furniture specialist now forecasts profits for the half-year ending December 29 will be between £16m and £17m, a gain of between £7m and £8m on the same period last year.

It said profit growth was driven by higher sales, operating cost savings and improved gross margin that offset inflationary increases.

Against a more challenging trading backdrop, DFS’s order intake rose 10.1 percent, with its Sofology business posting a 19.1 percent increase.

However, the Doncaster-based company expects delivered sales to increase by just 1.4 per cent due to delays caused by the Red Sea crisis.

Attacks by Houthi militants on ships sailing through the Suez Canal have forced many cargo operators to take longer voyages around South Africa’s Cape of Good Hope.

Mixed update: DFS expects its first-half profit to nearly double, but warned of rising costs related to the recent fall budget.

DFS subsequently saw its freight costs skyrocket and delay millions of pounds in deliveries.

The London-listed company also warned of rising operating 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, employer National Insurance contributions will rise from 13.8 per cent on wages over £9,100 to 15 per cent on wages over £5,000, and the national living wage will rise by 6.7 per cent. at £12.21 per hour.

Since these measures were unveiled, many retailers have cut jobs, while the UK economy has stagnated and retail sales have suffered a challenging ‘Golden Quarter’.

As a result, DFS said it had a “cautious view” on market demand and expects earnings to weight towards the first half of fiscal 2025.

Tim Stacey, CEO of DFS, acknowledged that the furniture market “remains relatively depressed.”

But he said DFS was “cautiously optimistic despite rising inflationary pressures and less positive market prospects for 2025.”

Stacey added: “Looking ahead, we are confident that the group is well positioned to generate attractive returns for shareholders as the market recovers.”

Britain’s home goods sector has suffered from a softening of trade in recent years as rises in mortgage rates have slowed the level of home purchases and exacerbated cost-of-living problems.

DFS cut its dividend after suffering a £1.7m pre-tax loss last year due to “historically low” market demand.

Its recovery will depend in part 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, investment analyst at AJ Bell, said: “A sofa is an expensive purchase for most households, so companies like DFS need people to feel secure in their finances and a healthy housing market for them. be able to be confident in the demand.

“If that’s not the case, households might be tempted to stick with their old suite, even if it’s starting to look a little old and tired.”

DFS Furniture Stock They were down 1.3 per cent to 139.8p on Friday morning, but have risen by around a quarter over the last year.

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