DFS sees profits knocked after £21m supply chain hit

Sofa chain DFS posted a drop in half-year sales and profits as it revealed a hit of around £21 million from supply chain difficulties and warned of ongoing disruption.

The retailer reported pre-tax profits tumbling 70% to £21.6 million in the six months to December 26.

DFS said its performance was knocked by delays to shipments and deliveries as containers were held at ports, as well as staff and lorry driver shortages, while its supply chain costs also surged.

The Omicron variant of coronavirus posed a further headache to the group in its first half, with staff absences running high within sofa factories and its own retail chain.

It said the Sofa Delivery Company – its recently launched group-wide supply chain platform – saw staff absence levels jump by around 10% over the half-year.

The group faced a hike in the cost of its goods of around 6% year on year, with an overall knock to net profit margin and operating costs of about £21 million.

Boss Tim Stacey warned that the company now expects manufacturing and supply chain problems to continue throughout the whole of 2022.

But he said DFS has a solid order bank and is helping to offset cost pressures with a rising number of sales.

He said: “Trading across the second half to date has started strongly, again emphasising the increased scale of the business and demonstrating the success of our approach to mitigating the impact of inflationary pressures on our profit expectations.

“We narrow our scenario range for 2021-22 to recognise that manufacturing and logistics disruption may affect the second half throughput; however, our resilient order bank should mean any such in-year disruption will cause profits to shift into the next 2022-23 reporting period.”

The firm’s interim results showed revenues fell 2% to £561.1 million as DFS also came up against buoyant business from a year earlier when trade was boosted following the lifting of lockdown restrictions.

But it said sales and profits were higher on a two-year comparison – up 35.8% and 15% respectively.