DFS shares hit the floor following first post-election profit warning – the chances are it won't be the last

Just days after an inconclusive general election and the first profit warning is in.

Even operating a seemingly permanent sale, with ads to promote it running at all hours and on all channels, hasn't saved DFS.

The pugnacious furniture retailer had already warned of a “softer market environment in the second half of our financial year”. That means bosses were worried about the punters not spending so much.

Now they're saying that it’s much worse than that with “significant declines in store footfall leading to a material reduction in customer orders”. Translation: We're seeing fewer customers in our stores and we're taking fewer orders as a result. So we're going to make less money.

“We believe these demand effects are market-wide, in line with industry indicators, and are linked to customer uncertainty regarding the general election and the uncertain macroeconomic environment.”

So (and are these people incapable of writing in English?) it’s not just us feeling the sales pinch. We think our rivals are too.

“Uncertain macroeconomic environment,” by the way, probably refers to Brexit as well as the election, but DFS doesn’t want to say so, probably for fear of annoying some of the limited number of customers who are still buying.

As they always do, the company has tried to serve up a few crumbs of comfort: “As stated previously, the upholstery market does see short-term demand fluctuations from time-to-time, within an overall historical trend of long-term growth.”

Trouble is, shareholders weren't interested in looking at the upholstery market's long term potential. They marked DFS shares down by more than a fifth, wiping more than £100m off the company’s market value.

The only consolation for the retailer's executives is that the market was willing to accept – at least to some extent – that their problems are not specific to their business.

That can be seen in the fact that shares in rival ScS were also hit, falling by more than 7 per cent. The forecast dividend yield there is nearly 9 per cent, which tells you all you need to know about how weak the sentiment towards it is. When a stock's yield hits that sort of level it's a signal that market thinks the dividend will fall. At 6.4 per cent DFS's yield is more modest but the same rule applies.

It will now be interesting to see if ScS chooses to update investors ahead of its next scheduled trading update which will probably appear in August ahead of October's results.

It wouldn't come as a huge surprise if it did that because none of this should come as any sort of surprise. As DFS was telling the market of its woes, the Office for National Statistics was reporting that retail sales between April and May fell by an unexpectedly high 1.2 per cent.

Higher prices across all sectors “seem to be a significant factor in slowing growth," it opined. Well, duh.

Throw in the political uncertainty DFS references in its mangled prose, and it's no wonder the firm is struggling. When people are nervous and prices are rising it’s big and expensive items that take a substantial chunk out of household budgets that get hit first. Even offering four years of interest free credit won't help you much.

It speaks volumes that retail analyst Nick Bubb says he has been “noting for a while now that the electrical market has been quite weak and the cloud over big ticket retailers has increased”.

Broker Shore Capital doesn't cover DFS, but thought its statement was sufficiently important to make it worthy of comment all the same because if DFS is correct, and the problems there aren't company specific, watch out.

“Theresa May’s ‘strong and stable’ mantra would appear to quite wide of the mark compared to where the UK consumer economy may be today,” said Shore.

“If care is not taken, instability could also be where it is heading on a more prolonged basis, so hitting consumer sentiment and behaviour.”

Quite.