Profits at sofa chain DFS have tumbled after the group was thumped by Britain’s faltering economy, falling consumer confidence and the Brexit-induced collapse in the pound.
The company booked a 22.3% fall in pre-tax profits to £50.1 million in the year to July 29, while revenue edged up just 0.9% to £762.7m.
DFS pointed to a “very challenging furniture market”, with chairman Ian Durant adding: “Continuing uncertainty in the economy led to a significant deterioration in the consumer market which impacted sales in the second half of the year.
“The continued weakness of sterling against the US dollar has also created a headwind for gross margins, some of which we have been able to mitigate.”
Soaring inflation caused by the collapse of the Brexit-hit pound has pushed up shop prices for hard-pressed consumers, leading retail sales across the board to slump.
DFS flagged in August that profits would take a hit from uncertainty caused by the snap General Election and warm weather, which led to weak trading at its stores.
The retailer said it saw significant declines in store footfall and customer orders from April to June.
CEO Ian Filby said: “We have continued to make good strategic progress across all our key areas of growth, while our financial performance reflects the current challenges of the UK furniture market.
“Our recent strategic investments and operating efficiency programme support our confidence in our ability to deliver modest profit growth and cash returns in the current financial year and we continue to have excellent prospects for the long term.”
DFS said it will seek out efficiency savings as revenue growth becomes “harder to achieve”.
The company’s shares tumbled on the news, falling over 3% to 215p.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “DFS has been hit by a double whammy of slowing consumer demand and rising costs, stemming from a weaker pound.
“Big ticket items like sofas tend to be the first things consumers cut back on when they are feeling the pinch, and a slew of poor sales data from the car industry corroborates that trend.
“Things don’t look like they are getting much easier either, with DFS expecting weak trading conditions to continue into the next financial year.”