UK retailers signal more gloom as Asos, DFS and Dunelm deliver disappointing trading reports

Business

Companies reported more gloom on the UK retail front on Thursday, with sofa seller DFS issuing a profit warning and soft furnishings firm Dunelm announcing a drop in sales.

Online retailer Asos said on Thursday that it expects sales for 2018 to fall at the lower end of a predicted growth range of 25-30 per cent. Asos shares fell 11 per cent in early trading.

“This does not mean Asos has suddenly become a bad or disappointing company,” said Russ Mould, AJ Bell investment director. Instead, he said, it indicates how much emphasis Asos investors place on future earnings estimates.

DFS’s stock dropped 10 per cent at one stage in early trading, after the company revealed it expects to report earnings for the full financial year below the figure recorded for last year.

DFS said in a trading update for the second half that this was due to “significantly lower than expected order intake” because of the “exceptionally hot weather” throughout the fourth quarter, which also affected key trading weekends.

The company also said it had “experienced disruption outside of our control to ships bringing made-to-order products from the Far East”.

Investors appeared to ignore advice from analysts at Peel Hunt, who said: “Don’t panic – the weather, England’s World Cup run and issues at Felixstowe have combined to create a difficult set of trading conditions for home/big ticket retailers, and DFS is not immune.

“If DFS has a cold, we’d imagine that the competition are in retail hospital. DFS is in an enviable, market-leading position, tapping into a wide demographic and addressing the online issue as well.”

DFS said that it expects the retail market to remain challenging for the next year “given ongoing reduced consumer confidence levels”, but added that there should be some alleviation of current short-term demand constraints.

Dunelm reported flat like-for-like revenues in the 13 weeks to 30 June, with sales in shops falling 4.6 per cent in the same period due to “disappointing” footfall.

The firm has set aside a further £3m to provide for losses based on sales of products at clearance prices.

Shares in the company fell 1.5 per cent and are currently hovering at a five-year low.

Nick Wilkinson, Dunelm’s chief executive, said: “I firmly believe that our homewares authority, combined with our increasing ability to adapt to evolving consumer trends, means that there is very significant potential for growth of the Dunelm brand.”

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