General Election uncertainty hits DFS

'‹'‹Sofa specialist DFS Furniture'‹ has set alarm bells ringing with the warning that trading has '‹'‹recently weakened beyond '‹its '‹expectation, with '‹"'‹significant'‹"'‹ declines in store footfall leading to a '‹"'‹material reduction in customer orders'‹"'‹.'‹
DFS CEO Ian Filby has said the UK faces an increased risk of a market slowdown in 2017 because of the uncertain political and economic outlookDFS CEO Ian Filby has said the UK faces an increased risk of a market slowdown in 2017 because of the uncertain political and economic outlook
DFS CEO Ian Filby has said the UK faces an increased risk of a market slowdown in 2017 because of the uncertain political and economic outlook

The Doncaster-based firm​ believes ​​​the effects are market-wide, in line with industry indicators, and are linked to customer uncertainty regarding the ​G​eneral ​E​lection and the uncertain macroeconomic environment.

T​he economy has been thrown into doubt following the shock outcome of last week's election which resulted in a hung parliament. In times of doubt, consumers tend to put on hold the purchase of big ticket items such as a new three piece sofa.

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Since the Government's decision to trigger Article 50 three months ago, there are signs that the economy is stalling with inflation outpacing wage growth and consumers feeling the pinch from higher food prices caused by the collapse in sterling since the EU referendum last year.

DFS said it now expects full year earnings to fall below market expectations. Its new prediction for annual earnings is between £82m and £87m.

​The group said that the​ upholstery market see​s​ short-term demand fluctuations from time-to-time, ​but there is an overall historical trend of long-term growth.

​In a trading update the firm said: "​Notwithstanding this, 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.

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​"​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.

​"​We expect continued strong cash generation that has allowed the recent announcement of a £20m special dividend in addition to our ordinary dividend.​"

DFS said it would give a further trading update on August ​10, following the completion of the ​g​roup’s financial year.

​In March DFS announced record half year results and said it w​ould​ reward shareholders with its first special dividend.

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​​The firm said it ​wa​s negotiating with suppliers to mitigate the fall in the pound since Brexit, but warned that the UK could see a slowdown in 2017 following the triggering of Article 50.

​At the time ​DFS CEO Ian Filby said: “Consumer confidence to date has held up well, but we recognise that furniture retailing in the UK faces an increased risk of a market slowdown in 2017 because of the uncertain political and economic outlook.

“Economists are saying the market will be flat this year. I don’t see any signs at the moment of anything like the credit crunch. If you go back to 2008, DFS was massively successful because we are so flexible.

“We have so much product made here in the UK, it gives us a real advantage.”

The group said that its bigger size gives it significant advantages over rivals.