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DFS Furniture says annual profit dented by UK summer heatwave

The furniture group has also been hit by a slowdown in the housing market and a tough retail market
The sofa seller said it experienced an “exceptional downturn in market demand” in its fourth quarter

DFS Furniture Plc (LON:DFS) reported a slide in full-year profit, blaming the UK’s summer heatwave for an “exceptional downturn in market demand” in its fourth quarter, sending its shares down.

The furniture retailer on Thursday reported a 7.6% fall in underlying earnings (EBITDA) to £76.1mln in the year to July 28 on sales – before acquisitions – 2% lower at £747.7mln.

READ: DFS Furniture expects lower 2018 profits after heatwave and supply issues hit sales

The company said sales, including acquisitions, rose 14.1% to £870.5mln. It proposed a final dividend of 7.5p per share, maintaining the total ordinary dividend of 11.2p for the year. Like many of its peers, a slowdown in the housing market and a tough retail market also contributed to its sluggish performance. The company said in the final quarter it suffered a disruption to ships bringing made-to-order products from the Far East, while the hot weather led to much lower order intake.

“Financial results for the year reflected the exceptional downturn in market demand we saw in the fourth quarter,” CEO Ian Filby said in a statement.

"We are pleased to note that the market has recovered since the start of the new financial year, with the group seeing like-for-like order growth across all brands over the first nine weeks.  We believe, however, we are benefiting from deferred purchases in the prior financial year and overall we expect the market to remain subdued into 2019, constrained by political risk and weak consumer sentiment,” he added.

Online sales jumped 15.1% during the year as DFS improved its mobile site and app capabilities, including launches of the UK sector's first augmented reality web technology and cross-channel order building system, it said.

DFS opened three new 10-15,000 square feet stores during the period and started small store trials in Chelmsford and Guildford.

Despite the challenging market, Filby said DFS was well positioned to become stronger in the current environment, boosted by investment and acquisition benefits. 

In a note to clients analysts at Interactive Investor said it was concerned about the drop off in demand during the fourth quarter and voiced skepticism about the positive start DFS said it had made to its new fiscal year.

“While orders are up in the first nine weeks of the new financial year, don’t get excited. These are likely just deferred purchases, so expect more of the same Brexit and consumer downturn stories over the next six months,” they said.

Shares in DFS were 2.9% down at 204p in mid-morning trade.

-- adds analyst comment, share price info -- 

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