12 June 2024 , 08:10
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DFS Furniture, the sofa specialists, have issued another profit warning as they grapple with faltering consumer demand and hold-ups in deliveries due to Red Sea shipping troubles.
The retailer has been hit by delays of £12million to £14million worth of deliveries, now expected to roll over into the next financial year because of shipping issues in the Red Sea. The firm is also facing increased shipping expenses as vessels are forced to navigate around the crucial Suez Canal trade route to avoid attacks by Houthi rebels on cargo ships.
These challenges come on top of a slump in sales for expensive items like sofas, with shoppers tightening their belts and DFS having to offer deals to encourage purchases. DFS is bracing for sales to hover around £995million to £1billion for the year ending June 30, while it predicts a dip in annual underlying pre-tax profits of £10million to £12million.
Last year, the company posted underlying pre-tax profits of £30.6million for 2022-23. Back in March, DFS had already cut its forecasts, predicting revenues would drop to between £1billion and £1.02billion and underlying pre-tax profits would decrease to £20million to £25million.
In a statement, DFS said: "Since that update, consumer demand in the upholstery sector has remained challenging and Red Sea routing issues have persisted, resulting in delays to customer deliveries and higher freight costs."
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Consumer demand in the upholstery sector, has seen record lows with a 10% drop in volume. However, trading improved in the last quarter, indicating an increase in orders by 9%, albeit compared to fairly weak numbers from a year ago. The firm used various strategies to boost sales. It strengthened its product range and pricing in its Sofology brand and reintroduced four-year interest-free credit deals "at select times to maximise revenue and profit in this difficult trading environment".
They added: "Whilst the economic outlook remains hard to predict, we expect the widely predicted lower inflation and interest rate environment to have a positive impact on upholstery market demand levels with the declines experienced across the last three years starting to reverse and the market slowly recovering in our 2024-25 period."