DFS warns of margin squeeze due to currency movements

 
Helen Cahill
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It is thought consumers will spend less on non-essential items this year (Source: DFS)

DFS has flagged that its margins are being eroded due to the fall in the value of the pound.

The furniture retailer said that it was offsetting the effect of currency movements by negotiating prices with its suppliers. It also said that its ability to manufacture in the UK gave it a "competitive advantage".

The figures

In the 26 weeks to 28 January, gross sales grew by seven per cent as compared to the same period last year. The company did not provide figures on its like-for-like sales.

Why it's interesting

DFS and other retailers will start to feel the impact of the fall in the value of sterling as their hedging contracts run out throughout this year.

Read more: How to protect your portfolio from inflation's rising tide

However, retailers will also be battling a change in spending patterns, as inflation forces households to focus spending on essential items, such as food and fuel, rather than electricals and furniture.

What DFS said

On its outlook for the future, DFS said: "We recognise that in 2017 the retailing of furniture in the UK faces an increased risk of market slowdown given the uncertain outlook for consumer confidence. However, with its resilient operating model we believe the group remains very well positioned to respond to economic headwinds and cost pressures whilst achieving continued growth in its share of the UK retail market."

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