Furniture company DFS lost more than a fifth of its value on Thursday after the group said that it would not meet profit expectations for the current year, citing a challenging trading environment.

The company said the trading environment had weakened beyond its earlier forecasts and that store footfall had slipped sharply which had resulted in a material reduction in customer orders.

“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,” it said.

The warning sparked a fierce selling spree of the company’s shares and the stock value plunged by over 21 per cent, closing at 198p.

Neil Wilson, an analyst at ETX Capital in London described Thursday’s update as “a bit of a knock” after the DFS gave a relatively upbeat assessment of the environment in its half-year results.

But he also said that “the slowdown in the second half is not surprising when one considers the recent marco-economic data”.

Data earlier this week showed that inflation jumped unexpectedly to 2.9 per cent in May, its highest level in nearly four years, as a result of the slump in the pound since the Brexit referendum.

Real wages are now negative and Mr Wilson said that political uncertainty around the government and Brexit means that consumers may well be pushing back big ticket purchases.

Over the longer term, however, DFS gave a more upbeat outlook.

“We have maintained our investment in the business and we are confident that we will outperform the market over the longer term, driven by our scale, business model and proven growth levers,” it said.

“We expect continued strong cash generation that has allowed the recent announcement of a £20m special dividend in addition to our ordinary dividend.”