DFS lowers profit guidance as it warns of Red Sea disruption

DFS has warned that if the Red Sea crisis continues it could result in delivery delays and force the retailer to defer £4 million profit into its next financial year.

In a financial update, DFS said that the macroeconomic environment remained "challenging” with weaker demand resulting in the firm lowering its 2024 full year profit guidance to £20 - £25 million, excluding the potential risk of Red Sea delays.

Since November last year, Yemen's Houthi rebel group has targeted vessels passing through the strait of Bab al-Mandab which separates northeast Africa from Yemen. The group claims to be targeting vessels with connections to Israel following the start of the war in Gaza.

The crisis has forced many retailers to find alternative routes around the Cape of Good Hope to ensure the safety of cargo and crew, which has led to increased shipping times, labour costs and fuel consumption.

DFS said that for the 26 weeks to December 24 it had earned underlying profit of £8.7m, with sales dropping 5.6 per cent to £666 million year-on-year.

The company added that revenues for the year had been reduced by around £65 million.

“Whilst the current macroeconomic situation has presented many challenges, we are pleased to have extended our market leadership while reporting a resilient profit performance through the first half,” said Tim Stacey, group chief executive. “We remain confident in both our long-term growth strategy and the capability to deliver on our objectives.

“We remain well positioned to improve our profit margins without market recovery and remain confident in delivering our 8 per cent PBT target when the market recovers."

Last month EuroCommerce, a trade body representing the retail and wholesale industry in Europe, called for EU member states to address the Red Sea crisis and its impact on trade.

A report from the British Chamber of Commerce found that over half of UK retailers had been impacted by the disruption to shipping in the region, with some firms reporting rises of 3,000 per cent for container hire.

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