DFS Furniture tanks on profit warning

Shares in DFS Furniture tanked on Thursday as the retailer warned that its full-year earnings will be below market expectations due to a weakened trading environment.

The company said the trading environment has deteriorated more than it expected and it has seen a significant drop in store footfall leading to a material reduction in customer orders due to macroeconomic uncertainty and the general election. DFS now expects earnings before interest, taxes, depreciation and amortisation to be lower than the market expectations for the current year at between £82m and £87m.

"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.

"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."

DFS said it expects continued strong cash generation that has allowed the recent announcement of a £20m special dividend in addition to its ordinary dividend.

Neil Wilson, senior market analyst at ETX Capital, said: "These are uncertain times for the British consumer, who is shunning big purchases as they tighten the purse strings.

"The slowdown in the second half is not surprising when one considers the recent marco-economic data. CPI inflation has accelerated to 2.9%, while wage growth is slowing. Real wages are falling. If the gap continues to widen then the likes of DFS could suffer further as spending takes a knock. Undoubtedly the uncertainty around the general election and Brexit means people are delaying big ticket purchases."

At 0815 BST, the shares were down 22% to 196.25p.