DFS Furniture (LON: DFS) shares edged lower in early Thursday trading after the company reported lower profits for the 26-week period that ended December 25.

Cost headwinds and a “weak market environment,” particularly in the first quarter, resulted in DFS’ underlying profit before tax falling 16.2% to £7.1 million from £23.3 million during the same period a year ago.

DFS shares are currently down more than 3% on Thursday.

With inflation still elevated, there was expected to be a drop in consumer demand for high-ticket items, with consumers delaying spending on more expensive goods until absolutely necessary.

Revenue during the period came in at £544.5 million, down 2.2% from the £556.5 million reported last year.

Despite the slide in the first half, DFS said its order bank remains elevated, equivalent to around £4 million of profit, which it expects to realise through the second half of the year.

Meanwhile, it said cost headwinds are abating, and profit margins are expected to improve in the second half of 2023 onwards and beyond.

“Cost headwinds are reducing and in some cases reversing, and we expect our upward gross margin trajectory to continue as we execute our margin build-back plan,” said Tim Stacey, DFS’ Chief Executive Officer.

The company’s FY23 profit before tax and brand amortisation is expected to be between £30 million and £35 million, in line with market consensus and towards the lower end of DFS’ previous guidance.

It also approved an interim dividend of 1.5p.

By Sam Boughedda