DFS warning as Red Sea disruption hits deliveries

DFS Furniture has issued a profit warning after shipping disruption in the Red Sea and weak demand from customers.

The disruption to shipping has delayed between £12m to £14m worth of deliveries, the group said in its latest update to investors.

It means those deliveries will be pushed into the next financial year, denting this year's profits.

Cargo ships are having to take lengthy and expensive detours to avoid the Suez Canal trade route amid attacks by Houthi rebels.

The Houthis, an Iranian-backed rebel group, considers Israel an enemy and has been attacking shipping on one of the world's most popular trade routes in response to the war in Gaza.

The Houthi group has declared its support for Hamas and has said it is targeting ships travelling to Israel, though it is not clear if all the ships that have been attacked have actually been heading to Israel.

But because of the attacks and the threat, several container shipping companies have since diverted vessels to a much longer route around Africa's Cape of Good Hope and then up the west side of the continent, leading to shipping delays.

DFS Furniture sales are now expected to be £995m to £1bn in the year to 30 June.

The brand previously slashed its guidance figures in March and predicted revenues to fall somewhere between £1bn and £1.02bn.

"Consumer demand in the upholstery sector has remained challenging and Red Sea routing issues have persisted resulting in delays to customer deliveries and higher freight costs," DFS said on Wednesday.

It added that, despite higher shipping costs, it has still managed to reduced its operating costs by about £25m year-on-year.

The company said that it does expect consumer demand to improve as the rate of price rises slow and people may be able to benefit from any potential cuts to the interest rate by the Bank of England.