(Reuters) -British retailer DFS Furniture expects profits to grow over the coming 12 months as it cuts costs to bolster margins against a “significantly worse than expected” market, it said on Monday.
Shares in the company slipped 3% after it forecast in a trading update that pretax profit was likely to be “just over” 30 million pounds ($39.25 million) for the year to June 25, at the lower end of its 30 million to 35 million pounds forecast range. It will report full-year results on Sept. 21.
Britain has been battling high inflation and increasing borrowing costs, which has hit customers and businesses alike, prompting DFS to warn on profits earlier this year.
DFS, whose customers tend to be young families and those with average national income, said gross sales for the year to June were down 4% from last year, but remained above pre-pandemic levels.
The company, which sells sofas and upholstered furniture and boasts a 38% share in the living room furniture market, expects market volumes to decline by mid-single digits for its 2024 fiscal year, which ends in June.
But profit in fiscal 2024 are expected to grow in the low single digit millions of pounds, said the firm, which operates more than one hundred showrooms in the UK and Ireland.
The firm has been trying to bolster its margins by cutting costs and reducing spending as customers cut back on discretionary spending amid a tough economic climate.
Freight costs returning to pre-pandemic levels, along with the cost controls, would also help improve gross margin, the company said.
“What was a consumer concerned by the cost of living is now a consumer nervous about borrowings and there are no prizes for being gung ho with forecasts in that environment,” analysts at Peel Hunt wrote in a note.
($1 = 0.7643 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Nivedita Bhattacharjee and Conor Humphries)