DFS profits to be hit by general election and warm spring
10 August 2017
Sofa chain DFS has confirmed that profits will take a hit after an uncertain economic environment, the snap General Election and warm weather led to weak trading at its stores.
The retailer said it saw "significant declines in store footfall and customer orders" from April to June, leading to a 4% fall in second half revenue.
It follows a strong first six months of the year, when sales rose 7%, helping total revenue for the year ending July 29 eke out 1% growth.
As previously flagged, DFS anticipates full-year operating profit to be lower than market expectations, in the range of £82 million to £87 million.
In a stock market update, the retailer said: "The second half has been weaker than we expected owing to significant declines in store footfall and customer orders across April, May and June.
"We believe this to be an industry-wide issue, resulting from the uncertain economic environment and unexpected General Election, exacerbated by warm weather in May and June."
The group described the UK furniture market as "very challenging" with an uncertain outlook.
DFS added that it will seek out efficiency savings as revenue growth becomes “harder to achieve in the short term”.
However, the firm said that its summer sale “started satisfactorily in July”.
Last week DFS acquired rival Sofology in a £25 million deal and will take over its chain of 37 UK stores.
Soaring inflation caused by the collapse of the Brexit-hit pound has pushed up shop prices for hard-pressed consumers, leading retail sales to slump.
Shares in DFS tumbled by more than 7% to 214p in morning trading.
Neil Wilson, senior market analyst at ETX Capital, said: “Certainly consumer spending, which was remarkably robust in the six months after the EU referendum, has started to suffer.
“Sofas are probably the first to suffer as they require a commitment from the buyer to pay a certain amount each month. This requires job security and rising earnings.
“While the employment rate has remained extremely robust, real earnings are not so good, meaning it’s a lot tougher for people to afford that extra monthly commitment.”
Nick Ansell/PA Wire