It is rarely wise to read too much into a sofa retailer’s view of the trading outlook. Furniture and carpet stores have always seemed peculiarly vulnerable to hot weather, cold snaps, late Easters and most other supposed plagues of the shopkeeping game.
All the same, DFS’s warning that it will miss full-year operating profit forecasts – it now expects £82m to £87m compared with £94.4m a year ago – is rightly being taken as a worrying sign for the entire sector.
DFS blamed “customer uncertainty regarding the general election and the uncertain macroeconomic environment”. Well, maybe. Precise explanations of why the consumer mood may have shifted are usually impossible. The election was only a week ago, even though it feels like it happened in a different age.
The big-picture backdrop, however, is easier to describe. In real terms, wages are falling. In the three months to April, wage growth was 1.7% whereas inflation was 2.7% in April, and has subsequently risen to 2.9%. That represents a fundamental jolt to consumers’ spending power. Nor does it seem likely that increased personal borrowing can fill the gap. Savings rates are already at historically low levels.
Thursday’s retail sales figures tell a similar story – sales volumes were down 1.2%. There are relative winners in these trends, of course. Supermarkets, and even few clothing retailers, may be happier if punters decide to eat out less. But the general downturn in consumers’ mood feels real and substantial. It tallies with what many retail bosses have been expecting for months. Do not be surprised if we see more profits warnings.