DFS, the sofa store, yesterday predicted that increased competition would force smaller rivals to close over the next 12 to 18 months. The warning of an industry shake-up came as Lord Kirkham, DFS chairman, admitted that profits would be at the lower end of expectations this year.

Several analysts reduced forecasts as DFS said that pre-tax profits for the six months to the beginning of February would be lower than the same period last year, if a £5 million exceptional profit from a property sale was excluded. Consensus forecasts for the year to next August fell to between £52 million and £54 million from £54 million to £57 million.

The group, which employed Linda Barker, the interior designer, to front its advertising campaign last year, said that underlying orders were down 3.2 per cent in the eight weeks to January 31 against the same period a year ago.

Increasing competition from Argos, MFI and Homebase hit sales in the important January trading period and Jon Massey, chief operating officer, said that Lifestore, Marks & Spencer’s new home concept which opens this month, could have a big impact.

“All of that activity has galvanised Harveys and Courts (rival specialist stores) into action and created a maelstrom of activity on the promotional front,” Mr Massey said.

Matthew McEachran, analyst at Investec, said that DFS faced a tough 12 to 18 months: “I struggle to see what will trigger a recovery in the shares in the short term,” he added.