Shares In Furniture Retailers Plunge As DFS Warns Of Hard Landing
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DFS Warns Of The Painful Effects Oh High Prices
The fight is on for consumers’ remaining disposable cash and furniture companies look set to be heading for a hard landing as budgets are tightened amid the cost-of-living crisis.
Sofa chain DFS is the latest to warn of the painful effects of the march upwards in prices has had on demand for its goods, with pre-tax profit falling 43% to £58.5 million in the year to the end of June.
Gone are the days when consumers were piling up spare cash during the pandemic, to splurge on living room upgrades to add comfort to lockdowns. Now in an era of make do and mend, orders are expected to decline by up to 15% even compared to the pre-Covid period.
DFS is not only having to cope with a slowdown due to purchases which were brought forward during the pandemic, but now as household bills mount for essentials like food and heating, a plush new sofa is a luxury many consumers are happy to do without.
It’s little wonder DFS shares have plunged by around 13% today as investors assess the pile up of problems facing the retailer.
Made.com's Shares Drop
Worries about the sector have dragged down the share price of Made.com by nearly 4% and year to date they have dropped by 95%. This evaporation of value saw the company kicked out of the FTSE All Share at the last reshuffle.
Made.com has already highlighted that it has been very hard to attract new customers while hanging onto decent margins and has said it expected gross sales to fall from between 15% and 30% this year.
It’s trying to navigate this hugely challenging period by cutting costs ahead of an expected equity capital raise later this year.
Dunelm's Earnings
Even Dunelm which reported buoyant annual profits and sales yesterday is unlikely to be immune to the big budgetary squeeze amid rising input costs, and its share price has also declined today.
It prides itself on a value tag but the company said it can’t rule out price increases in the months to come which could make its customers think twice before spending on non-essential homewares.
Household Goods Store Volumes Drop
This trend has already been highlighted in ONS retail sales data from July which showed that household goods store volumes dropped by 0.4% mainly due to falls in furniture and lighting stores.
There will be a keen eye trained on the latest snapshot for August which is due out tomorrow but the indications are that affordability concerns will have continued to bite.
The signs are that consumers will have been ring-fencing available cash for a last blast of summer fun ahead of what’s set to shape up to be a pretty bleak winter of mounting household bills.’’
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
Source valuewalk