DFS shares have not looked as comfortable as its sofas in recent months, despite strong gains across the UK retail market.
The furniture retailer’s shares are down 7% this year as the furniture market faces a difficult year given higher interest rates and a declining housing market. But what can investors expect in its upcoming interim results?
In the group’s trading update back in January, DFS announced a good start to the winter sale trading period, with orders for the final three months up 18.8% and a stronger end to the year, following a challenging April to August. Its momentum continued into DFS’ ever important winter sale period, meaning the retailer now enters 2023 with an elevated order book.
As a result, DFS reiterated its mid case profit guidance of £36m profit before tax. The performance was solid against a challenging backdrop of weaker consumer confidence and high inflation impacting consumer spending.
Although investors can expect a strong set of results by DFS, the future remains challenging. Spending is coming under greater pressure and demand for high-ticket goods will likely be stifled.
Inflation is still considerably high and monthly mortgage costs are set to increase for homeowners ending fixed term deals. Keeping shoppers maintaining their spending at these levels will be challenging and the furniture market faces big questions in 2023.
Elsewhere, DFS’ organic traffic has taken a slight turn for the worse. A difficult economic backdrop has seen online traffic fall to 1.4m, with a consistent decline over recent months. However, given the return to instore shopping over the last 12 months following years of restrictions, the multichannel retailer’s traffic may have redirected back to stores.
By Jamel Boughedda