9th Jun 2022 19:08
(Alliance News) - DFS Furniture PLC's disappointing update was unsurprising given a slowdown in broader big-ticket item sales in the UK, analysts said on Thursday.
Shares in DFS slumped 12% in London on Thursday to 163.00 pence, and have dropped 34% so far in 2022.
For its third quarter, which ended March 27, it saw double digit growth in the volume of orders versus the same period in financial 2019, which was pre-pandemic.
"This volume growth was achieved despite offsetting significant cost inflation through mitigation and retail price increases," the furniture retailer said.
It added: "Moving into the fourth quarter the UK furniture market has seen a change in demand patterns with recent data from Barclaycard suggesting about 2.1% reduction in transactions in April relative to pre-pandemic periods. We have seen a similar change in order volumes across our group."
DFS noted the drop in transaction volumes is despite its recent market share gains.
"While we have increased our weekly production and delivered revenues progressively over the second half, to record levels in the fourth quarter, the ongoing Covid linked supply-chain disruption, combined with lower order intake since April has led to lower levels of production and deliveries relative to our previous expectations," DFS added.
For financial 2022, ending June 26, DFS is guiding for revenue between GBP1.15 billion and GBP1.16 billion - increased from GBP1.07 billion the year prior and up from GBP996.2 million in pre-pandemic financial 2019.
Looking ahead to financial 2023, DFS said its trading will be "resilient".
"It is difficult to forecast consumer behaviour over the next twelve months, but should the trends observed in April and May continue across financial 2023, this would broadly balance the volume benefit from the elevated opening order bank. Following the growth of the group in volume terms relative to pre-pandemic levels, we also believe that we have the opportunity to drive further cost efficiencies from our scale," DFS added.
DFS's update came after peer Made.com in May lowered its guidance for 2022 due to "highly challenging" market conditions.
Made reported that trading has been volatile and more challenging than anticipated in recent months. It said that "third-party data" suggests that the online furniture and home market is down 30% to 40% so far in 2022.
Of DFS's update, Peel Hunt said "even the best" are not immune from the wider big-ticket market slowdown.
"Unless you are from Mars you will be familiar with the fact that trading has been tough for big ticket retailers in the last two months," said Peel Hunt.
The UK's cost-of-living crisis has placed consumers under pressure.
Gfk's latest UK consumer confidence monitor dropped by two points to minus 40 in May, the lowest score since records began in 1974. In May 2021, the figure stood at just minus 9.
The index measuring the personal financial situation over the last 12 months dropped three points to minus 22 and the major purchase index also dropped by three points, to minus 35.
"Big ticket items like sofas were always going to be the first place where people think twice about handing over the cash. If you're under financial pressure, the idea of paying more than GBP1,000 for something is a big commitment. If bills are racing higher, it's an easy decision to hold off from getting a new sofa or armchair," said Russ Mould, investment director at AJ Bell.
Broker Shore Capital said the update from DFS was unsurprising after peer Made.com Group PLC's update last month.
"Consumers are starting to feel the cost-of-living squeeze and be more prudent around big-ticket items, making the strategy of players like DFS and Made.com (category extension into Homeware) even more crucial in this context," said Shore.
By Lucy Heming; [email protected] and Paul McGowan; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Dfs FurnMADE.L