End of Pandemic Boom for Durable Goods Hits DFS, AO World

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End of Pandemic Boom for Durable Goods Hits DFS, AO World

By Geoffrey Smith 

Investing.com -- Two updates from U.K. mid-caps on Thursday provided more stark evidence of the durable goods sector going 'cold turkey' as the pandemic boom fades and a cost-of-living crisis eats into consumer spending.

DFS (LON: DFSD ) shares slumped 16% to a 22-month low after the furniture chain warned of an abrupt 2.1% drop in transactions in April, which fell back below their pre-pandemic levels. Over the three previous quarters, sales had been running more than 10% ahead of the comparable period before COVID-19.

DFS said it had seen a decline in orders across the group since April, without specifying further, and downgraded its full-year guidance accordingly. It now sees U.K. and Ireland revenue and underlying profit before tax at levels only around 20% higher than for the 2019 fiscal year.

April is likely to have been a pivotal moment for U.K. retailers, after a massive rise in regulated energy prices immediately reduced disposable incomes across the country, sending the GfK's consumer confidence index to a level below even the depths of the 2008/9 recession and the start of the pandemic. 

Online electronics retailer AO World (LON: AO ) also suffered from the fading boom for hardware, albeit not in its home market. AO World said it will close its struggling German business after failing to gain critical mass in Europe's largest market.  Germany accounts for around 10% of group sales and AO will take a hit of up to 15 million pounds for winding the business down.

The news had been expected, but AO World stock still fell 3.1% to test its two-year low.

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