The furniture retailer DFS and the DIY group Wickes have warned of weak demand for high-cost household goods as consumers continue to cut spending in the cost of living crisis.
DFS, which specialises in selling sofas, said annual profits would be £10m lower than previously hoped and sales would come in up to £65m below expectations, adding that demand had “weakened significantly” over the past two months.
The poor outlook came after the company’s sales fell 5.6% to £666m in the six months to 25 December and pre-tax profits slumped to £0.9m from nearly £30m the year before.
Tim Stacey, the retailer’s chief executive, said: “As a result of weaker market demand we have lowered our full-year 2024 profit guidance to £20m-£25m, excluding the potential risk of Red Sea delays which we continue to monitor closely.”
Analysts said that about a quarter fewer sofas were being sold in the UK market as a whole than before the Covid pandemic, after a 10% drop in the second half of last year, which followed a previous 15% decline.
David Hughes, a retail analyst at Stifel, said: “Lower UK [national income], declining housing transactions and reduced credit availability could all affect UK consumer spending on big-ticket items, including furniture.”
At Wickes, sales at established stores fell 0.3% in the year to 30 December, as it said “the consumer environment for larger purchases continues to be challenging”.
However, the retailer said it had achieved pre-tax profits of £41.1m, above expectations, as efficiency gains had offset £22m of cost inflation.
The company said it had bought a 51% stake in the owner of the solar power installer Solar Fast, which it hoped would help it enter the “fast-growing market for home energy solutions”, initially with solar and gas-boiler installations and then air-source heat pumps and other services.
Both Wickes and DFS have been hit by caution among consumers who continue to face high energy and food bills as well as higher interest rates on mortgages and other debts.
A range of factors have affected consumer confidence, including uncertainty about the outlook for the UK economy – with a general election expected this year and unemployment numbers expected to rise – as well as wider geopolitical events, such as the wars in Ukraine and Gaza.
Large purchases such as sofas, new kitchens, luxury items and expensive technology like TVs are all being delayed as shoppers carefully manage their budgets.
