Furniture retailer DFS has tumbled to a loss for the past year after it was hit by Red Sea shipping delays and higher interest rates.
The sofa specialist, which has just two stores in Northern Ireland, said sales were significantly down year-on-year due to “exceptionally low market demand”.
It told shareholders that revenues dropped by 9.3% to £987.1 million for the year to June 30, compared with the previous year.
It said that delays to shipments due to cross the Red Sea – which have been redirected below the foot of Africa due to attacks on ships by Houthi rebels in the region – were partly to blame.
Disruption to shipments meant £12 million of sales were pushed back into the new financial year, DFS said.
The sales slump also comes as shoppers have held back spending on big ticket items in the face of the recent surge in the cost of living and higher mortgage and rental costs.
The retailer reported that “the level of decline was beyond our initial expectations” as orders slowed.
It also highlighted that it was knocked by higher interest rates from the Bank of England, which increased the cost of providing interest free credit for customers.
The group slid to a £1.7 million pre-tax loss for the year, compared with a £29.7 million pre-tax profit in the previous year, as a result of weaker demand.
This came despite the company securing £27.5 million in cost efficiencies through the year, as it remained on track to secure at least £50 million in savings by 2026.
DFS said trading since July has been in line with expectations, with order growth up year-on-year over the past 12 weeks.
It told investors it expects “a gradual market recovery over the course of the year”.
Tim Stacey, group chief executive, said: “I want to sincerely thank all our colleagues for their enthusiasm and continued commitment to delivering a great service to our customers in what has been a very challenging period for the group given the market conditions.
“It is clear that the upholstery market has a long road to recovery given the 20% decline on pre-pandemic levels that we have seen.
“Despite the challenges we have faced, we remain confident that the business is well positioned to capitalise on market recovery.”
Julie Palmer, partner at Begbies Traynor, said: “DFS’s results today are evidence of a company that has suffered through an exceptionally tough year, with gross sales and revenue taking a hit after the retailer experienced the lowest demand on record, supply chain disruption in the Red Sea and persistent economic headwinds.
“While consumer confidence remains shaky, there is also cautious optimism that demand will recover, bolstered by recent housing market improvements and growth in real household disposable income.
“When that happens, DFS looks to be well-placed to capitalise on the recovery as big-ticket sales come back into vogue.”
