Sofa seller DFS saw annual profits almost cut in half, sliding to £29.7m from £58.5m a year earlier, as the retailer was battered by economic conditions.
Revenue from operations fell 5.3 per cent to £1.09bn in the year to June 25, with the group blaming soaring inflation.
Chief executive Tim Stacey said that the company was operating in one of the “toughest economic climates” it had experienced.
Earlier this year, DFS downgraded its profit guidance to between £30m-35m for the full year. This is around half of the £60.3m underlying profit it reported in 2021-22.
It comes as the group rolled out cost savings initiatives and reduced capital expenditure to secure its balance sheet during the cost of living crisis.
Despite the fall, DFS said it still expects to hit its target of £1.4bn in revenues for the year.
DFS said: “We are confident the market will recover, however we can’t predict how quickly that will happen.
“We have a clear route to a five per cent [profit before tax] margin without market recovery, supported by further margin improvement, new cost efficiencies and continued growth in home.”
DFS share price rose more than seven per cent this morning as investors appeared to focus on the positives.
Neil Shah, director of research at consultancy Edison Group, said: “DFS hopes the prospect of furnishing investors with profit in 2024 somewhat cushions the fall in its annual profit. The home furnishing retailer has felt the effects of prevailing market conditions and lower than expected sales, as the cost-of-living crisis dampens demand.”
“However, DFS remains confident that low single-digit profit growth will be reached in 2024. The company also reiterated its commitment to reaching its target of £1.4bn of revenues at an eight per cent profit before tax margin and pointed to its record 38 per cent share of the UK upholstery market as a sign of its continued strength.”