Retail triple-whammy as DFS, Dunelm and Asos plummet

The City took flight from retail stocks on Thursday after furniture and sofas sellers Dunelm and DFS warned on profits, while sales at fashion website Asos disappointed.

The recent spells of hot weather have boosted beer, barbecue and big-screen TV sales, but hurt businesses like DFS as shoppers shunned its stores and splashed less cash on sofas and cushions.

A glitch with DFS’s deliveries from the Far East added to its headaches and dented earnings. The company said it was “outside of our control”.

DFS, which recently bought smaller rival Sofology for £25 million, said its underlying profits for the year ending in July would be lower than last year’s £82.4 million. The shares tumbled 10.8%, or 20.4p, to 464p.

Dunelm didn’t comment on the heatwave’s impact but admitted visits to its shops in the final quarter were poor, sending same-store sales down by 4.6% in the 13 weeks to June 30. It also had plenty of unsold stock worth about £3 million, money which it could lose.

As a result, full-year pre-tax profits are now expected to edge down to £102 million compared with £109.3 million in 2017. The shares fell as much as 20.4p to 464p before recovering.

Revenues for the year, however, were up 9.9% to £1 billion, lifted by online orders and Kiddicare, the baby goods specialist Dunelm bought in 2016, which, in turn, will have been boosted by the recent collapse of toys seller Toys R Us.

Investors also offloaded shares in Asos, the City darling whose market value is now greater than Marks & Spencer’s. It said sales growth for the year will be at lower end of the 25%-30% growth it had previously pencilled in. The stock plunged 10.2%, or 668p, to 5862p.

Bullish chief executive Nick Beighton said of the growth slowdown: “I’m completely cool with that. There’s no shortage of demand [for clothes], there’s no tangible increase in competition. We just have a different focus in managing infrastructure. It’s as simple as that.” The results come as High Street retailers battle tough trading, with overheads, squeezed consumers and online shopping causing closures.

The boss of discount retailer B&M on Thursday said that the demise of Poundworld, which left 242 people jobless, and Toys R Us, was good for business.

Chief executive Simon Arora told analysts: “[The fact that] it won’t exist is positive. It takes away a potential future competitor.”

Poundworld had been trailing a store format called Bargain Buys, which was “a straight copy of the B&M format, active in all [our] categories”.

He added that B&M has also benefited from the “absence” of Toys R Us and it gave him “high hopes” that it will sell more toys in the run-up to Christmas.

Arora also admitted that it was eyeing a “handful” of Poundworld stores after the troubled retailer fell into administration last month. However, he intends to negotiate a 30% rent cut on those sites. He said: “We were astonished at some of the rents [that] they’ve agreed to pay.”

B&M was one of the retailers lifted by June’s hot weather as people flocked to buy outdoor pools and garden products. Same-store sales in Britain were up 1.6% for the three months to June 30.