Retailer DFS has reported a big slump in profits and warned that the industry is facing a downturn as soaring bills mean fewer customers are in the market for a new sofa.

The Doncaster-headquartered business, which employs 5,000 staff across the business, said pre-tax profit dropped 43 per cent to £58.5m in the financial year that ended in June.

Order numbers “softened markedly” in the last three months of that period as the cost-of-living crisis weighs on customers.

It was a grim year for the sofa seller, boss Tim Stacey said.

The firm faced several different issues fed in part by the pandemic, Brexit and the war in Ukraine.

“This has been the most operationally challenging year that we can remember, with industry-wide Covid-related supply chain issues, double-digit cost inflation on raw materials and ongoing colleague absence and skill shortages,” Mr Stacey said.

The company warned that sales volumes across the industry could slump by 15 per cent in the current financial year compared with pre-pandemic levels.

That would slash its profit to as little as around £20m, even as the business said that its revenue would continue to grow.

That is the worst-case scenario that DFS presented to shareholders.

But perhaps more worrying for investors is the best-case scenario: a five per cent drop across the industry.

Even this – the most positive outlook – would see DFS profit fall to around £54m for the year ending next June.

It is a rough forecast, which saw the company’s shares drop around 13 per cent shortly after markets opened in London.

The business said it had “carefully absorbed” double-digit increases in costs into its prices.

The group launched seven new Sofology brand showrooms during the year, with two further openings planned in the next financial year, driving additional upholstery market share gain.

Meanwhile, a major DFS store transformation programme has now been rolled out across 47 stores, with the refitted stores showing enhanced sales growth and an average payback period of under 24 months.

DFS’s report added: “We have been reassured to date by consumers’ relative tolerance of any necessary price increases to offset inflation and the revenue benefit of the sustained c. 3 per cent points of market share we have captured since FY19.”

Earlier this year, the Doncaster head office of nationwide furniture firm DFS was transformed in a 16-week refurbishment.

The firm’s three storey office block in Adwick-le-Street was totally revamped by an interior design consultancy to create a modern workspace for the company’s employees.

Its centrepiece is a new coworking cafe bar and deli, with seating arrangements to encourage small informal meetings and larger ‘family-style’ gatherings.

The first, second and third floors had a refresh, including a new Group Ops hub and reconfigured furniture.

DFS profits slump as the furniture industry faces a downturn