retail

DFS warns of falling sofa demand as cost of living crisis bites


DFS Furniture warned of a sharp fall in demand for sofas and other home furnishings, as orders drop as a result of the cost of living crisis.

The UK’s largest furniture retailer on Thursday said orders had fallen to about 2 per cent below pre-pandemic levels in April, a figure that was comparable across the industry according to transaction data from Barclaycard.

It is the latest UK company to warn of the effects of the economic slowdown and rising inflation that are starting to hit consumer spending.

Online furniture retailer Made.com last month warned on profits and a “tough trading environment”, with disruptions to the global supply chain increasing costs.

This week, online car retailer Cazoo announced plans to cut hundreds of jobs as it warned of a looming recession.

Home furnishings was one of several sectors that benefited from lockdowns, as many people took money usually spent on commutes, lunches and work clothes and poured it into their homes.

But the subsequent supply chain crisis has been particularly hard for the industry, as the sheer size of items such as sofas and wardrobes has contributed to soaring transport costs.

Climbing inflation — which in May reached a 40-year high — is now putting more pressure on retailers.

DFS said that demand for its furniture had initially been strong despite rising prices.

Orders grew by “double digits” in the quarter ending in March, compared with the same period in 2019, but slumped in April and May.

The company said it now expected full-year revenues of between £1.15bn and £1.16bn, lower than previously guided, but still above the £996mn in sales it made in 2019.

Shares in the Doncaster-based company dropped 17 per cent on Thursday morning, as they continued a downturn that became sharper at the end of last year.

“While undoubtedly disappointing [the update from DFS] cannot be viewed entirely out of the blue,” said analysts at Jefferies, pointing to rivals such as Made, Home24 and Westwing having “all talked to weakness in the home category online”.

They did, however, expect DFS to use its “superior scale” to grow market share during the “challenging periods ahead”.

DFS said it was expecting to go into its next financial year with a “bank” of orders from when demand was still strong, which it said should help offset a potential future slide in furniture shopping.

“It is difficult to forecast consumer behaviour over the next 12 months,” the company said. “However, our trading history shows that the group has gained market share during periods of furniture market decline.”



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