Last week DFS revealed a sharp fall in pre-tax profits of 22.3% in the year to 29 July, despite the company having announced its acquisition of fellow sofa retailer Sofology and also having experienced an increase in revenue over the year. The chairman attributed the fall in profits to a “challenging market”, and DFS is not the only retailer to have suffered. John Lewis also announced a fall in sales last week of 0.9% and homeware retailer Topps Tiles has revealed that it is expecting its sales for the year to September to drop by around 1.5%.
This time of year can prove challenging for the industry, with many retailers relying on a successful trade on black Friday and in the run up to Christmas to balance the books. To add to these challenges is the current state of uncertainty surrounding the economy, particularly with Sterling remaining weak against the US dollar and Euro and the impact of Brexit still looming. The Bank of England has also hinted at a rise in interest rates - and should the cost of borrowing rise, sales of big ticket items such as furniture are usually the first to suffer when consumers begin to cut back.
These factors may hamper what retailers will be hoping to be a very busy Christmas period, and given the obstacles faced in the coming winter months, it is not unlikely that some of these businesses will run into financial difficulties.
Although not usually in the forefront of retailers’ minds at this time of year, it is important to consider the possibility that one of your business’ key customers or suppliers might run into financial difficulties at some stage in the future and to put in place measures to protect your business from this risk. Please click here for our guide on managing customer or supplier insolvency.
Nicola Broadhurst