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Sofa giant enjoys shares jump as it shrugs off Brexit

By Holly Williams

Published 12/08/2016

Increasing numbers of house moves have spurred profit growth at furniture chain DFS
Increasing numbers of house moves have spurred profit growth at furniture chain DFS

Sofa chain DFS - which has two stores in Northern Ireland - upped its earnings outlook after a record full-year performance.

The Doncaster-based group said while it had not yet seen any drop in demand since the decision to quit the EU, there was an "increased risk of a market slowdown" for furniture firms.

Higher costs from the weaker pound and competition were added threats, the group, which has stores in Belfast and Londonderry, said.

But it did warn over darkening gloom following the Brexit vote.

Its cautious outlook comes after an impressive second half performance, with revenues up 7% year-on-year. The group is now expecting profits at the top end of City forecasts, sending shares surging by 12%.

Analysts had pencilled in a rise in pre-tax profits to between £60.7m and £64.6m for the year to July 30, up from £10.7m for the previous year.

It comes after a similarly cheery update on Tuesday from rival ScS, which showed strong trading before and after the referendum, with total like-for-like sales orders up by 14.8% in the 53 weeks to July 30.

Retail sales figures have so far held up well despite signs of falling consumer confidence, but a Bank of England survey of firms on Wednesday noted shopper demand for large items had fallen in the month since the referendum as shoppers have become more cautious.

DFS said it was too early to give a "meaningful assessment" of the impact of the Brexit decision.

It added: "The board recognises that, following the EU referendum, retailing of furniture in the UK faces an increased risk of a market slowdown with additional cost pressures from foreign exchange movements, whilst it is likely that the retail environment will remain intensely competitive."

But the firm put faith in its "resilience" to withstand any downturn.

Retail experts at Jeffries said: "We are encouraged to see that DFS has not seen a weakening of demand post-EU referendum, which would suggest positive like-for-like sales".

Meanwhile, elsewhere on the markets, South African retailer Steinhoff has upped its offer for discount chain Poundland after pressure from a US hedge fund to bump up the deal. Poundland has agreed to a higher 227p-a-share bid, worth £610.4m including a 2p-a-share dividend, following moves by Elliott Management to build up a 17.5% stake in the group.

Steinhoff had originally agreed a 222p-a-share deal worth £597m last month, but within days the US activist had increased its stake. Poundland and Steinhoff remained tight-lipped on Elliott's involvement in the higher offer. Darren Shapland, chairman of Poundland, said the "board is pleased to recommend Steinhoff Europe's increased all-cash offer which presents Poundland shareholders with an opportunity to realise their shareholding at an improved price."

Belfast Telegraph

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