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Brexit warning as DFS hikes earnings outlook

Published 11/08/2016

DFS said it had not seen a drop in demand since the decision to quit the EU but warned of an increased risk of a market slowdown
DFS said it had not seen a drop in demand since the decision to quit the EU but warned of an increased risk of a market slowdown

Sofa chain DFS upped its earnings outlook after a record full-year performance, but warned over darkening gloom following the Brexit vote.

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 intense competition were added threats, the group said.

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 £60.7 million and £64.6 million for the year to July 30, up from £10.7 million 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, f ollowing 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 company 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."

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