Market share increases but profits fall at DFS

Doncaster-headquartered furniture retailer, DFS, says it is continuing to win share in a very tough market, but has seen its profits fall by nearly 50% in its preliminary results for the 52 weeks ended 25 June 2023.

The business says its reported pre-tax profit of £29.7m – down 49.2% – and underlying pre-tax profit and brand amortisation of £30.6m – down 49.3% – is a “low point” for the group, not counting the Covid lockdown period, and reflects “a very weak market and high levels of input cost inflation.”

Group revenue from continuing operations was £1,088.9m, a decrease of 5.3% from the prior year.

Tim Stacey, group chief executive officer said: “The group is operating in one of the toughest economic climates we have experienced.

“Whilst we are confident the upholstery market will recover, forecasting the specific timing and pace of the recovery is challenging.

“We do, however, expect to generate a modest year-on-year increase in profit before tax in FY24 despite a relatively weak market in which we expect volumes will continue to decline across the next 12 months.

“Looking to the future as market volumes recover, we remain confident in achieving the financial performance set out at our Capital Markets Day in 2022 of £1.4bn of revenues at an 8% profit before tax margin.”

DFS says it now has a record 38% of the UK upholstery market and operationally is in the strongest position it has been since the pandemic.

But it warns the wider economic environment led to an “incredibly challenging year” for the group, with the business having to balance the need to invest in the assets and resources to support future growth with caution given market volatility.

The business says high levels of cost inflation and significant increases in interest rates reduced consumer confidence levels, which have remained at or close to record lows, and also reduced consumer real disposable income levels.

As a result, DFS says the UK upholstery market has been under significant pressure and it estimates market order volumes were down 15% or more relative to pre-pandemic levels.