DFS Furniture Cuts FY24 Expectations as Demand Levels Hit ‘Record Lows’

DFS Furniture (LON: DFS), the UK furniture retailer, lowered its profit and revenue forecast for the financial year ending June 30th, 2024, citing weak consumer demand and ongoing shipping issues.

While the company maintained its market share leadership, exceeding 38.5%, overall upholstery sales declined by 10% compared to the previous year. This, combined with higher freight costs and strategic investments to stimulate sales, led to a downward revision of their profit forecast.

“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 company stated.

DFS now expects full-year pre-tax profit to fall between £10 million and £12 million, down from the previously guided range of £20 million to £25 million. This reduction is driven by a lower sales volume due to Red Sea shipping delays and a weaker market.

Specifically, there has been a lower level of delivered customer orders, with £12 million to £14 million of delayed deliveries from the Red Sea disruption, with those deliveries expected to move into FY25.

As a result, the company's FY24 revenues are now expected to be in a range of £995 million to £1 billion, down from the previously guided range of £1 billion to £1.015 billion. DFS also said it has experienced higher shipping costs due to freight rates increasing above previous expectations in its fourth quarter.

Despite these challenges, DFS highlights positive developments. Their gross margin rate is expected to increase by 1.4% year-on-year, and operating costs have been reduced by an estimated £25 million.

Additionally, order intake has shown improvement in the fourth quarter, potentially signaling a turnaround.

Looking ahead, DFS anticipates a market recovery in FY25 as inflation and interest rates are predicted to decline. The company believes its strong market position and operational efficiency will allow it to capitalize on this potential upswing.