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Furniture specialist DFS has revealed a decline in profits in H1 due to rising costs and a weak market environment despite record market share, with profit before tax falling to £7.1m, down from £23.3m the year before.
According to its latest interim report, its profit before tax and PBT margin of 1.3% are both below historical levels reflecting very low market wide demand levels in the first quarter.
Yearly revenues also declined to £544.5m from £556.6m registered in 2021. The company stated that gross margins dropped to 52.7% in FY22 due to a variety of challenges, including increased shipping rates, cost of goods and general inflation.
But DFS also added that the profit margins decline will not affect its business and that they will continue to “offer great value for customers.”
Despite the challenges, DFS reported record market share, with circa 2% points increase from the FY22 position to 38%.
Looking ahead, it expects its profit for the year to be between £30m-£35m, in line with external expectations, which is towards the lower end of its previous guidance.
Tim Stacey, group chief executive officer, said: “The share gains have gone some way to alleviating the impact of the weaker market we have observed in 2022 overall. Those gains built throughout the period with the group delivering strong order intake growth in the second quarter.
“At our capital markets day in March 2022 we set out our ambitions to grow revenues to £1.4bn and operate at an 8%+ PBT margin generating post tax free cash flows of 75%+. We continue to target that level of financial performance and have solid plans in place to deliver this.”
