The firm had warned on profits in June, highlighting a dip in demand amidst the UK's uncertain economic and political outlook.

British consumers' spending power has been dented by a rise in inflation, caused in large part by the fall in the value of the pound since last year's vote to leave the European Union, and by a slowdown in wages growth. Sofas are seen as a discretionary "big ticket" purchase.

DFS's earnings before interest, tax, depreciation and amortisation fell to 82.4 million pounds in the year to July 29, down from 94.4 million pounds in the previous year and at the lower end of the company's forecast in June.

Gross sales rose 1.1 percent to 990.8 million pounds.

"Our financial performance reflects the current challenges of the UK furniture market," said Chief Executive Ian Filby.

"Our recent strategic investments and operating efficiency programme support our confidence in our ability to deliver modest profit growth and cash returns in the current (2017-18)financial year."

Shares in DFS, down 14 percent over the last year, closed on Tuesday at 225 pence, valuing the business at 476 million pounds.

The firm is paying a total ordinary dividend of 11.2 pence for the year, up 1.8 percent. It has also paid a special dividend of 9.5 pence in the year.

(Reporting by James Davey; Editing by Greg Mahlich)