The sofa retailer DFS has warned the market has been “significantly worse than expected” as demand for big-ticket items has been hit by the cost of living crisis.
It said the tough economic climate, in which mortgage rates have hit their highest level since 2008, had depressed sales volumes by 15% to 20% across the market.
However, DFS said it is outperforming the market, with gross sales for the year to the end of June down 4% from last year, but up 15% against pre-pandemic levels as it increased its share of the market to 38%.
DFS said cost-cutting has helped it mitigate the impact on profits, which it expects will be slightly above £30m for the year.
In March, the retailer downgraded its profit expectations to between £30m and £35m, marking a steep decline on the £60.3m underlying profits reported in 2021-22.
However, it said “prudent planning” and cost control, as well as freight costs reverting to pre-Covid levels, should help profits lift slightly over the new financial year.
It expects market volumes to decline by mid-single digits this year. Sales of home furnishings are closely tied to the health of the housing market, in which asking prices have declined as interest rates have risen.
The DFS chief executive, Tim Stacey, said: “We are in the strongest position we have ever been as a group in terms of market share, and when the market recovers, we will be well placed to deliver our strategy and grow our earnings and cashflows towards our longer-term plan.”
The chain’s latest trading statement is in contrast with its post-lockdown positivity, when sales of sofas rose as people refreshed their furniture after being confined to their homes for months.
A consumer survey published in April found that 41% of people with savings had yet to buy any big-ticket items this year, with 34% saying they would not do so over the rest of 2023.
More than half of UK consumers have cut back on discretionary spending since the start of 2023.
