Furniture chain DFS says it is enjoying greater profitability but has sounded a cautious note about ongoing demand and costs.
The Doncaster-based retailer had suffered what it called exceptionally low demand in 2023 and the early part of last year, but reported improved orders in the latter part of 2024. A new trading update from the firm brought further news of improved trading in the half year to the end of December with underlying profit before tax expected to be circa £16-£18m, up by about £7-£8m year-on-year.
Group order intake was up 10.1% year-on-year despite what DFS said was a weak market backdrop. It pointed to higher than expected market share gains for its core brand and Sofology, with orders there improving 19.1% year-on-year. Growth in the group's order bank was also driven by continued disruption to shipping in the Red Sea caused by Houthi rebels' attacks on commercial freighters.
Chief executive Tim Stacey described cautious optimism despite a continued subdued market and mounting costs in the second half of the year, including from raised national insurance contributions and the national living wage. Higher than expected interest rates were also said to be weighing on the group's investment plans.
Mr Stacey said: "While the market remains relatively subdued, we are continuing to deliver on our self help initiatives having strengthened our position as the clear market leader, improved our gross margin and reduced our operating costs, all of which have helped us to deliver year on year profit growth.
"We remain focused on executing our plan, and are cautiously optimistic despite the increased inflationary pressures and less positive market outlook for 2025. Looking forward, we are confident that the group is well positioned to drive attractive returns for shareholders as the market recovers and we remain focused on delivering our 8% profit before tax medium-term target."
DFS will announce interim results for the 26 week period ending December 29, 2024 on March 13, 2025.
