DFS is expecting to see a growth in profits in its opening half results but warned it is facing higher costs in 2025 as a result of tax changes in last October’s Budget.

The furniture retailer has forecast its pre-tax profits to be £16m to £17m, which would be around £7m to £8m up year-on-year.

In a trading update covering the 26-week period to 29 December, DFS said the profit increase has been driven by the higher sales, operating cost savings and gross margin improvement, which has more than offset current inflationary increases as well as Red Sea shipping delays.

Despite this, the group warned it currently has a “cautious view” on market demand in H2, as a result of the fallout from the Autumn Budget.

The furniture retailer is expecting an increase in operational costs in H2 due to the rises in national insurance contributions, the national living wage and higher than anticipated interest rates alongside its own investment to drive future growth.

“While the market remains relatively subdued, we are continuing to deliver on our self-help initiatives having strengthened our position as the clear market leader, improved our gross margin and reduced our operating costs, all of which have helped us to deliver year-on-year profit growth,” DFS chief executive, Tim Stacey, said.

“Looking forward, we are confident that the Group is well positioned to drive attractive returns for shareholders as the market recovers and we remain focused on delivering our 8% PBT medium-term target.”

DFS will announce its interim results for the period ending 29 December 2024 on 13 March 2025.

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