Money DFS says UK's heatwave is behind falling earnings

15:02  12 july  2018
15:02  12 july  2018 Source:   news.sky.com

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(Reuters) – British sofa specialist DFS Furniture expects full-year 2018 core earnings to be below those in 2017 as it suffers from disruptions to supplies and a UK heatwave that has kept shoppers out of its stores, the company said on Thursday.

Shares in DFS tumbled 10% in early trading after it blamed the long hot spell for a big fall in orders and told the City that earnings in the current financial year would be lower than in 2017. Dunelm cut its forecast further after issuing a profit warning in May. The heatwave and the World Cup have given

DFS says the recent heatwave is partly responsible for a decline in earnings © PA DFS says the recent heatwave is partly responsible for a decline in earnings

DFS Furniture has warned that the UK's heatwave has hit its bottom line, with full-year earnings for 2018 expected to be lower than 2017.

The owner of Dwell and Sofa Workshop says shoppers have been kept out of its stores because of the hot weather, and the fall in earnings has also been blamed on "disruption" to ships bringing supplies from Asia.

Like-for-like revenues have fallen about 4% over the 49 weeks to 7 July, the company said.

Analysts had been expecting earnings before interest, taxes, depreciation and amortisation (EBITDA) of £84.51m for the year ending July.

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  DFS says UK's heatwave is behind falling earnings © PA

However, in a statement, DFS said it anticipates EBITDA for the full financial year will be below the £82.4m reported in 2017.

EBITDA is a measure of profitability that companies prefer to use while they are going through periods of change, usually because they have acquired new businesses.

The UK's biggest independent furniture retailer, which bought smaller rival Sofology for £25m, is struggling amid a slowing housing market, tighter credit conditions and a squeeze in household budgets.

DFS said: "We continue to expect that the furniture retail market will remain challenging over the next 12 months, given ongoing reduced consumer confidence levels, although we would expect some alleviation of current short-term demand effects.

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Pay squeeze intensifies as wage growth falls further behind inflation. Official data published this week showed British workers’ earnings after inflation have been shrinking at their fastest pace since 2014. DFS said it now expected to make profits of of £82m to £87m for its year to the end of July.

"Our previous investments in our supply chain and the recent acquisition of Sofology, together with progress expected at Dwell and Sofa Workshop, will provide benefits to earnings that we expect to help mitigate the challenging sales environment."

In March, it reported a 58% fall in pretax profit to £7m in the first half of the year. That included £4.6m in costs and charges related to the acquisition of Sofology and upmarket brand Multiyork.

Shares in DFS slumped 9% to 180p in early trading on the London Stock Exchange.

While a recent hot spell has helped some British retailers, the Confederation of British Industry warned in late June that clothing stores and furniture shops were reporting a fall in sales.

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Aerial images highlight the effect the heatwave is having on Britain's green and pleasant land as the parched earth turns an arid yellow amid scorching temperatures and little rainfall. The Shires London golf course near Barnet in London has lost its lush green vigour and turned an arid yellow Aerial images highlight the effect the heatwave is having on Britain's green and pleasant land as the parched earth turns an arid yellow amid scorching tem In scenes more commonly spotted on the continent, drone shots show how rolling green landscapes and lush countryside have been replaced by scorc

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