DFS warns profits to tumble due to Red Sea disruption and weak demand

Furniture giant DFS has warned that weak demand and disruption to Red Sea shipping routes could slash its annual profits by half.

It said that the weak upholstery market had resulted in lower levels of customer orders, which combined with delays to up to £14million worth of deliveries and higher shipping costs due to Iranian-backed militants targeting commercial ships in the Red Sea, will hit its profits and revenues.

As a result, DFS has cut its forecast for its pre-tax profits for the 12 months to June 30 from £20-25million to £10-12million and lowered its revenue target from £1billion plus to £995million.

Despite the expected hit to its revenues and profitability, DFS said that its cost-cutting efforts are likely to reduce its expenses by approximately £25million year-on-year.

It added that while the economic environment is “hard to predict”, it believes that the combination of lower inflation and interest rates should kick start an upholstery market recovery soon, reversing three years of declines.

It added that reintroducing four-year interest-free credit on purchases should help its trading.

At its interim results in March, DFS reported that its revenues had fallen 7.2 percent to £505million and that its profits had risen 1.6 percent to £8.7million.