Sofa seller DFS sticks to profit guidance despite sector slowdown

The business reduced revenue guidance, but kept its profit outlook unchanged.

The furniture brand said warm autumn weather had shrunk the market (Denis Kennedy/DFS Furniture/PA) (PA Media)

Sofa seller DFS Furniture said it has largely weathered a downturn in demand caused by hot conditions in the autumn.

Bosses said on Friday that by reducing the business’s costs they would likely manage to ensure that a hit to the company’s top line would not travel down to its bottom line.

Revenue is now expected to be around £1.02-1.04 billion in the financial year which ends next summer. That is £40 million less than the company had guided in September.

Yet underlying profit guidance was unchanged at £30-35 million before tax and brand amortisation.

“The group has performed well in tough trading conditions. Despite the weaker than expected market, good operational performance and progress on gross margins and lowering our cost base have enabled us to deliver a profit for the first half that is slightly ahead of the prior year and we remain on track to deliver our full-year profit target,” said chief executive Tim Stacey.

“Looking forward, the group has good growth prospects and is well positioned to drive attractive returns for shareholders, capitalising on market recovery as well as growing our home offering and delivering our 8% profit before tax target.”

DFS said that the furniture market had been weaker than expected, with the amount of furniture sold down around 9% from a year earlier.

“We believe this performance was particularly impacted by record hot weather in September and early October when footfall and demand proved to be especially weak,” it said.

Demand has since recovered, the business said, and the profit guidance is based on the assumption that the amount of furniture sold remains 5% lower in the second half of the financial year.

Shares in the business rose 2% on Friday morning.