DFS Furniture PLC (LSE:DFS) has a “clear opportunity” once the sofa market begins to normalise, that’s according to analysts at Jefferies.
The comments come after DFS today issued a profit warning, with an eleventh-hour downgrade to its revenue guidance for the year ending 30 June 2024.
The retailer, in a statement, said it now expects £995 million to £1 billion of revenue in the 53-week trading period, down from £1 billion to £1.015 billion.
Profit before tax is meanwhile seen between £10 million and £12 million, from prior guidance of £20 million to £25 million.
DFS blamed the reduction on decreased customer orders and higher shipping costs related to ongoing disruptions in the Red Sea.
Some £12 million to £14 million worth of deliveries originally due in the current financial year are now expected to register after 30 June, it noted.
It, meanwhile, told investors that the company retains a strong market position with a company ‘record market share’ of over 38.5%.
Jefferies, in a note, meanwhile, pointed to an improved trend in the fourth quarter and the analyst team anticipates a recovery in the new financial year.
“While it has clearly been a challenging trading period, we note the sharp improvement in Q4 trading,” the broker said.
“Benefiting from the combination of a weak comp period and investments to drive volumes, order intake through Q4 to date is running at +9%, even if there will have been a material margin impact to deliver this. DFS also highlights its robust market share position, which continues to run at record levels (38.5%).”
“Anticipating a return to growth in FY25. Management notes that the outlook remains 'hard to predict', but that it expects a 'slow market recovery' during the 2025 financial year.”
DFS this morning, meanwhile, said: “We have been encouraged by an improving trend in our group order intake, which is up over +9% in our fourth quarter to date, in line with our expectations.
“Whilst the economic outlook remains hard to predict we expect the widely predicted lower inflation and interest rate environment to have a positive impact on upholstery market demand levels with the declines experienced across the last three years starting to reverse and the market slowly recovering in our FY25 period.
“We are well placed to capitalise on any market recovery given our market leadership position, the operational leverage in the business and the progress we are making on our cost base.”
In London, shares were down 4% changing hands at 108p – having traded as low as 95p in early deals.