Sofa, not so good: DFS shares crash as it warns on profit

 
Courtney Goldsmith
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DFS warned its profit will be lower than expected (Source: DFS)

DFS has warned its profits will take a hit from a weakened trading environment in the UK due to economic uncertainty.

The furniture retailer had previously warned it expected "softer" trading in the second half of the year, but today it said the market has weakened beyond its expectations as significant declines in store footfall have led to a material reduction in customer orders.

Shares in the firm dropped a whopping 24 per cent at the market open before rallying slightly, to sit at 199p, down 21.4 per cent on last night's closing price.

"We believe these demand effects are market-wide, in line with industry indicators, and are linked to customer uncertainty regarding the General Election and the uncertain macroeconomic environment. As stated previously, the upholstery market does see short-term demand fluctuations from time-to-time, within an overall historical trend of long-term growth," DFS said.

The retailer expects earnings before interest, tax, depreciation and amortisation (ebitda) for the full year to be in the range of £82m to £87m, lower than market expectations.

DFS said it is confident it will outperform the market in the longer term and insisted its expectations for the next financial year were realistic.

The company's warning could be the first of many in the big ticket retail world, said analysts at Shore Capital Markets:

"If DFS is correct in its analysis then there would appear to be the greater likelihood of more short-term warnings coming from the non-food retailers in the UK in the near-term, particularly the bigger ticket discretionary players. Today’s warning could, therefore, lead to a broader sell-off in the higher ticket listed general retailer over the next few days.

"Beyond the current hiatus, if that is the case, the dust may quickly settle. [However] we do harbour a concern that Theresa May’s ill-fated election may have slightly more enduring implications for UK consumer confidence and, indeed, business confidence, both domestic and importantly with respect to ongoing foreign direct investment. Time will tell, hopefully, our growing caution is misplaced."

Read more: We've come sofa: DFS chairman steps down

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