Sofa retailer DFS has said that “challenging market conditions” hit performance in the past half-year and warned that the developing Covid-19 outbreak meant it was unable to give accurate forecasts for the rest of the year.
The company said sales slipped 5.7% to £488 million for the year to December 29, as the impact of “political uncertainty” and weaker consumer confidence offset online growth.
DFS said that trading for the current half-year started “satisfactorily” but the business has observed a change in consumer footfall to its showrooms “in very recent days” following the Covid-19 outbreak.
It said that any disruption to order intake over the key Easter and May Bank Holiday trading periods is likely to impact upon its performance for the 2020 financial year.
DFS said it has also seen “limited operational impacts”, with the company’s four Chinese finished goods suppliers shutting down for an extended period after Chinese New Year.
We continue to make progress on our strategic agenda focused on driving the DFS core business, further developing our group platforms and setting Sofology up for future growth.Tim Stacey
It added that uncertainty surrounding the impact of the virus meant “it is not possible to give guidance with any certainty for the full year”.
Underlying pre-tax profits for the past half year fell to £20.5 million from £38 million in the same period a year earlier.
The company said it expects annual profits to be hit by up to £5 million following disruption to systems in its Sofa Workshop business.
It said it hopes to improve profitability by securing property savings through a combination of rent reductions downsizing some of its showrooms.
DFS said that, despite falling footfall, it was encouraged by digital growth, with group gross online sales increasing 4.5% to £117 million.
Tim Stacey, group chief executive officer, said: “We continue to make progress on our strategic agenda focused on driving the DFS core business, further developing our group platforms and setting Sofology up for future growth.
“Despite the challenging retail environment, and excluding some isolated systems disruption in Sofa Workshop, our performance over the first half has been as expected, given the exceptional prior year comparative driven by latent demand.
“Notwithstanding the uncertain short-term outlook, we remain confident in the group’s financial strength and relative track record of performance in all environments.”