DFS warns on profit due to slowing demand
Furniture retailer DFS has warned on profit after seeing a change in order volumes during the cost of living crisis.
In a pre-close trading statement, the retailer said underlying pre-tax profit before brand amortisation for the year to 30 June is now expected to come in at £57 million to £62 million, which is down from a previous guidance of £66 million to £85 million. In addition, it expects full year revenues to be between £1.15 billion and £1.16 billion.
DFS said: “Moving into the fourth quarter the UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting a circa 2.1% reduction in transactions in April relative to pre-pandemic periods. We have seen a similar change in order volumes across our group.”
The retailer said ongoing Covid linked supply-chain disruption, combined with lower order intake since April, has led to lower levels of production and deliveries relative to previous expectations.
However, DFS now anticipates closing the financial year with an order bank elevated by around £30 million or circa 2.5% of annual revenues compared to before the emergence of Covid-19. This will give it some resilience going forward into the new financial year.
The retailer added: “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.
“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.”
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