Sofa retailer DFS profits slump in face of most ‘challenging year’
DFS said this morning the sofa seller has suffered a big slump in profits.
The Sofa retailer has admitted to the “most operationally challenging year” it can remember with the industry-wide issues of Covid-related supply issues, double digit cost inflation and skill shortages sending annual pre-tax profit falling by 44.8%.
Moreover, the company warned that the industry is facing a downturn as soaring bills mean fewer customers are in the market for a new sofa.
DFS said pre-tax profit dropped 43 per cent to £58.5m in the financial year that ended in June.
Order numbers “softened markedly” in the last three months of that period as the cost-of-living crisis weighs on customers.
DFS faced several different issues fed in part by the pandemic, Brexit and the war in Ukraine.
Group CEO Tim Stacey says: “Looking forward, the UK furniture market continues to be challenging and the outlook for the sector remains uncertain given the macroeconomic environment. From the fourth quarter of the year, we saw a reduction in the volume of orders, which we believe is consistent with the overall furniture retail market, although our elevated order bank will provide some resilience as we enter our 2023 financial year.
“In previous challenging environments DFS has performed resiliently and strengthened its market position, by leveraging its fundamental strengths in brand equity, manufacturer access, store sales densities, scale of operations and flexible cost base. In the face of the current slowdown in the market, I am confident that we will emerge stronger.
“We will continue to pursue our strategy outlined in our Capital Markets day on 15th March, and stand behind our ambition to grow turnover to £1.4b and increase our PBT(A) profit margin to over +8%.”
“We are targeting cost opportunities on property, supply chain and administrative activities, created by the scale benefits of ongoing DFS and Sofology brand alignments and volume growth relative to pre-pandemic levels,” states DFS’ outgoing chair, Ian Durant.
“Furthermore, we have been reassured to date by consumers’ relative tolerance of any necessary price increases to offset inflation and the revenue benefit of the sustained c.3% points of market share that we have captured since FY19. These factors, together with the over a £30m elevated order bank entering the financial year, will provide some insulation to our short-term profit expectations.”
In July DFS, lost its head of finance and former UBS and Citi senior executive Mike Schmidt to value high-street retailer B&M. The company is still understood to be searching for a successor.
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