DFS chief executive Ian Filby told Retail Week that today’s profit warning was the result of external factors and would not impact the retailer’s investment plans.
The furniture specialist, which floated in 2015, said a cocktail of unfavourable retail weather, a late Easter, and macro-economic uncertainty pre- and post-election caused a drop in customer orders over the last few months.
Consequently, DFS has lowered its full-year EBITDA expectations by around 12%, expecting it to come in between £82m and £87m.
But, a pragmatic Filby told Retail Week that the drop in demand was “no big surprise”, and “not unusual” given macro-economic pressures in the market.
He said: “Everyone is talking about a loss in footfall over the spring bank holiday and election period. We’ve clearly not been immune to that.
“If you look at the election in 2015 or the Brexit vote, in a market like ours there tends to be some dampened demand until people are at least clear what’s happening.
“What we’re witnessing is something that’s happened fairly frequently over the years.
“At our half-year results, we anticipated that 2017/2018 was going to be slightly tougher. So it’s not a big surprise.
“The level to which it’s been concentrated over this time frame is just a little bit worse than people were anticipating.”
The profit warning follows an approximate 5% sales drop across the overall furniture sector, according to the latest BRC-KPMG data.
Looking ahead, Filby predicts there won’t be the “usual bounce-back” that retailers tend to experience after an election, before adding, “but nor do I particularly think it’s going to have a significant impact on consumers over a longer timeframe.”
He clarified there would be no major changes to its strategy.
“There’s no change to our investment plan or growth levers,” he said.
“We plan to invest in exactly the same way going forwards.
“Being a very strong company in the sector we anticipate that, as in the past, we will thrive relative to the competitor set and continue, as we have done over the last few years, to slightly grow market share.”
DFS is not alone
Independent analyst Nick Bubb predicts the challenging trading backdrop will impact retailers across the furniture sector.
He said: “We have been noting for a while now that the electricals market has been quite weak and now the cloud over ‘big ticket’ retailers has increased.”
Bubb predicts DFS’ profit warning “will go down like the proverbial lead balloon in the City” and that the retailer’s rival ScS “is bound to be hit as well”.
Stifel analyst Scott Ransley said: “As recent retail sales, UK inflation and earnings data have highlighted the squeeze on disposable incomes, we expect further earnings downgrades in coming weeks.”
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