// DFS suffers a big slump in profits and warns that the industry is facing a downturn as inflation soars
// The retailer warned that sales volumes across the industry could slump by 15% in the current financial year compared with pre-pandemic levels
DFS has reported a significant slump in profits following an “operationally challenging” year and warned that the industry is facing a downturn as soaring bills mean fewer shoppers are buying sofas.
For the full year until the end of June, the furniture retailer posted underlying profits of £60.3 million, down from £109.2million during the previous year.
The business said pre-tax profit dropped 43% to £58.5 million in the financial year that ended in June.
DFS said order numbers have “softened markedly” in the last quarter of the financial year and the first three months since the year-end as the cost-of-living crisis hits consumer confidence.
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It was a grim year for the sofa seller, chief executive Tim Stacey said.
The business has faced several different issues fed in part by the Covid-19 pandemic, Brexit, the war in Ukraine and sky-high inflation.
“This has been the most operationally challenging year that we can remember, with industry-wide Covid-related supply chain issues, double-digit cost inflation on raw materials and ongoing colleague absence and skill shortages,” said Stacey.
The retailer warned that sales volumes across the industry could slump by 15% in the current financial year compared with pre-pandemic levels.
That would slash its profit to as little as around £20 million, even as the business said that its revenue would continue to grow, although this is the worst-case scenario that DFS presented to shareholders.
DFS said it had “carefully absorbed” double-digit increases in costs into its prices.
“Looking forward, the UK furniture market continues to be challenging and the outlook for the sector remains uncertain given the macroeconomic environment,” said Stacey.
“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.”
