DFS warns profits will be hit by 'economic uncertainty'
Sofa chain DFS has issued a warning over its profits after the General Election and an 'uncertain macroeconomic environment' led to weak trading at its stores.
The furniture retailer said that since March it has seen 'significant declines in store footfall', leading to a material reduction in customer orders.
Consequently it now expects its full-year operating profit to be lower than market expectations and in the range of £82 million to £87 million.
Warning: UK 'economic uncertainty' has hit DFS profits.
Shares dropped this morning by 17.4 per cent to 208p after the statement was released.
DFS said: '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.'
Consumer confidence has been knocked down by a series of factors triggered by last year's vote to quit the European Union. As a result the pound fell and inflation rose, ramping up costs for British businesses and grinding down consumer spending power.
However, DFS added: 'We have maintained our investment in the business and we are confident that we will outperform the market over the longer term, driven by our scale, business model and proven growth levers.'
'We believe our expectations for the next financial year are realistic based on consumer confidence remaining broadly in line with current levels, given its consequent impact on upholstery demand.'
Laid back: Brexit and the recent General Election is reducing consumer spending power
Senior market analyst at EXT capital, Neil Wilson noted these are uncertain times for British consumers, who are shunning big purchases as they tighten the purse strings.
He commented: 'DFS shares cratered in early trading after the company issued a profits warning and said trading is not holding up as well as hoped. The stock collapsed more than 20 per cent as investors turned their back on a company that is gravely exposed to increasingly fragile consumer spending.'
'The slowdown in the second half is not surprising when one considers the recent data. CPI inflation has accelerated to 2.9 per cent, while wage growth is slowing. Real wages are falling.'
'If the gap continues to widen then the likes of DFS could suffer further as spending takes a knock. Undoubtedly the uncertainty around the general election and Brexit means people are delaying big ticket purchases.'