DFS Furniture (LON: DFS) shares have made a bed-er than expected recovery since its recent earnings report, but can the stock spring back, or do investors need to be chair-ful…
Sorry! enough with the puns…
For a lot of furniture goods, external factors impact sales considerably. DFS and the industry in general, will be affected by seasonal changes, consumer habits, or general spending.
Along with several UK retailers, DFS shares, despite the more recent rise, struggled in 2022, falling around 31% in the last 12 months. With the aforementioned external factors playing a key role in its performance, how will it be impacted in 2023?
DFS recently experienced a more positive trend in order volumes back in September after tougher trading conditions over the summer.
And while it noted “the macroeconomic outlook is uncertain and inflationary pressures remain high,” it also said the business is resilient and remains “well-positioned.”
So with the company expected to release a trading statement this week, has Christmas demand and boxing day sales, given a prolonged boost to the positive trend?
According to Semrush, the number of customers visiting the DFS website has declined over the six months or more and in 2022, following record highs in 2021.
However, the pandemic played a key role in customers opting for online shopping instead of in-store purchases, while many people moved house or redecorated their homes during the period.
Therefore, a decline from its all-time highs is somewhat warranted given the restrictions in 2020 and 2021.
Even so, online traffic is currently at 1.6 million, which is similar to its 2018 levels. The fall is fairly substantial, and with soaring inflation dampening consumer spending, the more recent decline may not be solely due to the return to in-store shopping. Especially as post-pandemic factors have now generally faded.
Elsewhere, Google Search interest for DFS Furniture has yet to provide a strong argument in favour of consumer demand…
Its interest is currently ranked at 34 by Google, although trading over the Christmas period provides a significant jump in search volume each year, and we are doubtful as to whether it will be anything more than its usual spike.
With DFS expected to post a trading update on January 13, we should get more clarity about its sales over the Christmas period.
Elsewhere, overall consumer sentiment (where we assess social media chatter and the latest news) for DFS is currently tilted towards the neutral to negative side.
However, the company has recently faced a lot of criticism regarding delayed orders.
In addition, well as more of a side note really, there are many, many comments regarding its never-ending sale (the usual everything must go now sale that seems to always be running!).
Is DFS One to Watch?
Based on current demand trends, DFS shares do not stand out to us as a stock to own at the moment.
As of now, its online demand metrics have stabilised, but it’s difficult to see any major demand increase in the near-term (next few months). The group will likely have benefitted from the festive season and boxing day sales, but for now we don’t see that being sustained.