DFS has warned that its profits could be cut by up to a third after a fall-off in sales since the turn of the year.
The group, which saw its share price drop by 7% as shareholders reacted, warned that the upholstery market had seen a drop in volumes of about 16% across January and February. It says it ‘has not been immune to this’ and cut its full-year sales guidance by £60m-£65m to £1bn-£1.015bn.
It now says profits will be between £20m-£25m, having previously forecast £30m-£35m.
It also says that delays in shipping through the Red Sea could result in profits of up to £4m being pushed into the next year.
Its updated forecast is also reliant on an upturn in demand in the coming months. ‘The guidance assumes H2 market volumes broadly consistent with H1 year on year, in a range of -8% to -10%, supported by weaker Q4 comparatives and a level of pent-up demand following the weak January and February. We remain cautious about consumer confidence starting to improve and benefit demand until FY25,’ it says.
‘I want to thank our colleagues for their dedication toward providing a first class service to our customers. Whilst the current macroeconomic situation has presented many challenges, we are pleased to have extended our market leadership while reporting a resilient profit performance through the first half. As a result of weaker market demand we have lowered our FY24 profit guidance to £20m-£25m, excluding the potential risk of Red Sea delays which we continue to monitor closely. This reflects revenue guidance reducing by £60m-£65m, partially mitigated by good progress on our Cost to Operate programme,’ says Tim Stacey, DFS Group ceo.
‘We remain confident in both our long-term growth strategy and the capability to deliver on our objectives. We remain well positioned to improve our profit margins without market recovery and remain confident in delivering our 8% PBT target when the market recovers.’
