DFS Furniture PLC on Wednesday warned of lower-than-expected profit amid weak consumer demand and disruption of supplies passing through the Red Sea.

Shares in the Doncaster, England-based home furniture retailer were down 3.4% to 108.74 pence in London.

For the financial year that ends June 30, DFS now expects adjusted pretax profit of between £10 million to £12 million, down from previous guidance of £20 million to £25 million.

This has been driven by reduced deliveries of customer orders, with £12 to £14 million of delayed deliveries via the Red Sea due to the conflict in the Middle East.

These deliveries are expected to slip into financial 2025.

As a result, financial 2024 revenue is expected to be in a range of £995 million to £1.00 billion. DFS had previously forecast revenue of £1.00 to £1.02 billion.

DFS said it has seen shipping costs rise as a result of freight rates increasing above previous expectations.

The cost issues are compounding the effect of a weak upholstery market.

Consumer demand in the upholstery sector has declined by around 10% in volume terms year-on-year from a weak starting point, DFS said, bringing overall market demand levels to record lows.

There was better news on margins with full year gross margin expected to be up 140 basis points year-on-year.

In addition, DFS said it has reduced operating costs which are expected to be down around £25 million year-on-year.

Together these have limited the lower sales impact on profitability, DFS said.

DFS added that it was encouraged by a 9% upturn in group order intake in the fourth quarter and expects lower inflation and interest rates to have a positive impact on upholstery market.

It sees the market ‘slowly recovering’ in financial 2025.

Copyright 2024 Alliance News Ltd. All Rights Reserved.