DFS and Dunelm blame hot weather for shock profit downgrades | Business

Britain’s heatwave has hit sales at the homeware retailers DFS Furniture and Dunelm, compounding difficult conditions on the high street and forcing both companies to warn profits this year would be below expectations.

Shares in DFS tumbled 10% in early trading after it blamed the long hot spell for a big fall in orders and told the City that earnings in the current financial year would be lower than in 2017 – its second profit warning in just over a year. Dunelm cut its forecast further after issuing a profit warning in May.

The heatwave and the World Cup have given other retailers and pub groups a much-needed boost, bringing shoppers back to the embattled high street, and lifting beer, barbecue and big-screen TV sales in particular. But DFS and Dunelm said hot weather put consumers off buying sofas and home furnishings such as curtains, rugs and bedding.

DFS, which recently bought the sofa retailer Sofology and also owns Dwell and Sofa Workshop, said: “In the fourth quarter to date, exceptionally hot weather, including over key trading weekends, has led to significantly lower-than-expected order intake.”

The company has also suffered disruption to ships bringing made-to-order products from east Asia. This means like-for-like revenues are 3% down from last year over the 23 weeks to 7 July, and 4% lower over the 49 weeks to 7 July.

DFS warned profit for the year to the end of July would fall below last year’s £82.4m. Until Thursday, City analysts had been forecasting a small rise in profit to £84.5m.

Dunelm, Britain’s biggest homeware chain – which like DFS trades from out-of-town superstores in retail parks – has also been hit by weak consumer spending. It ended up with more leftover stock than usual after its summer sale, which has hurt profit margins.

DFS expects the furniture retail market to remain tough over the next 12 months, arguing consumer confidence remains weak. Analysts say big-ticket items tend to be the first things consumers cut back on when they feel the pinch, while homeware sales also tend to suffer during hot weather.

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Like-for-like sales at Dunelm’s stores fell 4.6% in the 13 weeks to 30 June, but once online sales were factored in – up nearly 42% – sales were flat. Overall revenue in the quarter fell 1.4% due to the acquisition of the loss-making WorldStores and Kiddicare.

Dunelm expects to post profit before tax and one-off items of £102m, down from £109.3m last year and its May estimate of a profit “moderately below” that of 2017.

Analysts at Peel Hunt said: “The scale of downgrades remain disappointing, although much of this is a function of external conditions and unfavourable weather in the fourth quarter, rather than Dunelm-specific concerns.”

DFS shares initially dropped 20p to 178.6p and later traded down 5.4% at 187.8p, while Dunelm shares were down 0.95% to 479.80p.

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