DFS sees order boost after slashing profit expectations

DFS has seen an upturn in orders in recent weeks after continuing shipping distruption and lower demand saw profits half.

The group says current orders are up by more than 9% in comparison with weaker performance a year earlier and ‘initiatives to strengthen the product ranging and pricing in Sofology’ and the selective reintroduction for four years IFC.

In March it forecast that sales for the year to 30 June would be £1bn-£1.015bn with profits of £20m-£25m, with a further £4m of profits moving to next year’s figures if Read Sea shipping delays continued.

Now it has told shareholders that profits will be £10m-£12m with about £13m of orders pushed into 2025.

‘Consumer demand in the upholstery sector has declined c-10% in volume terms year on year from a weak starting point bringing overall market demand levels to record lows. The group has continued to operate through the period with record value market share of over 38.5%. Despite higher shipping costs and investments to drive required order intake volumes in Q4, we have continued to grow our full year gross margin rate, which is expected to be up +140bps year on year. In addition, we have reduced our operating costs which are expected to be down approximately £25m year on year. Together these have limited the lower sales impact on our profitability,’ it says.

‘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 FY25 period. 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.’

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