Furniture giant sits uneasy due to Coronovirus
Furniture retailer DFS is monitoring the Coronavirus situation keenly according to its latest half year results.
The Doncaster-based firm says it has noted a change in consumer footfall to showrooms over recent days. It warns this is likely to further impact trading over the key periods of Easter and May Bank Holidays and as result potentially its full year results. The retailer also highlighted that assuming the situation normalised ahead of its financial year end it expects to incur an additional £1m of incremental delivery costs as a result of the virus’ impact across its network.
This news follows the FTSE 100 dropping 8% yesterday as fears of a global recession grew, caused by the impact of coronavirus and an oil price war.
Highlighting the impact to date of Covid-19, DFS claims it has only really affected the four Chinese finished goods supplier factories the retailer uses. With these four factories still to return to full capacity since Chinese New Year.
On average DFS imports just under £10m (gross sales value) of finished goods from China per week. If the current shortfall can’t be made up ahead of year end, sales will need to be moved in to the next financial year. This movement could impact on the business’ cash flow by circa £2m for every £10m deferred sales.
Outside of China to date none of DFS’ suppliers have been impacted, with internal manufacturing operations and most of its European suppliers having sufficient raw material stock to see production of orders for a number of months. However two of its smaller European suppliers are based in the South of Italy and therefore will be potentially affected in the near future.
Tim Stacey, group chief executive officer of DFS commented on the results which showed a 5.7% decrease in revenue to £629.7m: “Despite the challenging retail environment, and excluding some isolated systems disruption in Sofa Workshop, our performance over the first half has been as expected.
“Trading in the second half for the Group has also started satisfactorily with performance in the DFS brand particularly encouraging, with order intake growth year-on-year and good gross margins.
“However, given the uncertainty as to how the current COVID-19 situation will develop it is not possible to give guidance with any certainty for the full-year out-turn.”
DFS isn’t the only business to be impacted by Coronavirus, with FlyBe’s collapse last week partly blamed on the virus, Jaguar Land Rover announcing a 85% hit in sales as a result of the virus in China and Mondelez – the parent company of Cadbury, closing two factories and seeing its first quarter results impacted.
