DFS has reported rising profits, but warned of an increase in costs due to the Budget and said demand for its sofas is set to be sluggish going into 2025.
The furniture group said profit for the six months ending December 29 is expected to be up to £17 million, a rise of as much as £8 million compared with the same period last year.
DFS said it enjoyed increasing sales with its order intake rising 10% compared to the same period the year before.
It said trading is “in line with our expectations” at the start of its key winter sales period, but that there was a “less positive market outlook” for 2025.
Part of the reason for the rise in profit was that DFS cut its costs during the period in a bid to offset cost inflation.
However, DFS said it also expects to see an increase in costs this year, in part due to business tax rises announced in the October Budget.
Chancellor Rachel Reeves announced a rise in national insurance contributions (NICs) for employers and an increase in the minimum wage last year.
The NICs increase is designed to fund improvements to public services like the NHS, but it has come under fire from retailers for making it more expensive to employ people.
The company said on Friday that it has a “cautious view” on market demand in the first half of 2025 based on economic performance in the UK.
The trading update comes as new official figures showed that sales across all UK retailers unexpectedly declined last month in a blow to the sector during the all-important festive shopping season.
The volume of retail sales – which measures the quantity bought – fell by 0.3% in December, the Office for National Statistics said.
Chief executive Tim Stacey said the market for DFS’s products “remains relatively subdued”.
But he added: “We remain focused on executing our plan, and are cautiously optimistic despite the increased inflationary pressures and less positive market outlook for 2025.”
