DFS shares plunge on profits warning

Sofa chain DFS Furniture has seen shares slump after warning over profits following a drop in orders as consumers rein in their spending amid the cost-of-living crunch.

The retailer said it has seen a shift in customer demand over its fourth quarter and a fall in orders, which will hit profits, sending shares tumbling by 17%.

The firm said the drop was similar to the recent 2.1% decline in consumer spending reported by Barclaycard for April compared with pre-pandemic levels.

It marks the latest sign of a pull-back in spending on big items as the cost-of-living crisis weighs on UK households.

The threat of a recession is looming large as soaring inflation is expected to lead to a sharp drop in consumer and business spending over the year ahead.

DFS added that it is seeing lower levels of production and deliveries than it had expected due also to ongoing supply chain disruption.

It slashed its outlook for underlying pre-tax profits to between £57 million and £62 million for the year to June 26, against previous City expectations of around £77 million.

Revenues are now set to come in at about £1.15 billion to £1.16 billion, down from the £1.19 billion pencilled in by the City.

The group said it has boosted its order book – up by around £30 million or 2.5% of annual revenues compared with before the pandemic – which will “provide some resilience going into our 2023 financial year”.

However it warned: “It is difficult to forecast consumer behaviour over the next 12 months, but should the trends observed in April and May continue across 2022-23, this would broadly balance the volume benefit from the elevated opening order bank.”

It is hoping to drive cost savings to help offset some of the trading pressures.