- Dunelm’s turnover expanded by 1.6% to £490m in the quarter to 28 December
- The retailer noted strong demand for its sofas, dining chairs and coffee tables
Dunelm shares fell on Thursday as the group flagged ‘challenging’ market conditions and additional ‘cost headwinds’ heading into the second half of its financial year.
The Leicestershire-based homeware retailer’s turnover grew 1.6 per cent to £490million in the 13 weeks ending 28 December and by 2.4 per cent to £894million over the first half of its financial year.
Online purchases as a share of total sales grew by three percentage points in both periods, to 40 per cent in the second quarter and 39 per cent in the first half, thanks to rising click-and-collect sales.
Dunelm noted strong demand for furniture products, including dining chairs, coffee tables and sofa collections.
Nick Wilkinson, chief executive of Dunelm, said customers responded well to the ‘value and choice we offer’ amid a ‘challenging environment’.
Weak consumer confidence and the glacial pace of Bank of England interest rate cuts have weighed on demand for homeware and property refurbishment.
Dunelm has bucked the trend with continued sales growth, which it has partly attributed to expanding its ranges and relatively high demand among younger consumers.
But the firm warned that the forthcoming rise in National Insurance rates announced in the Autumn Budget represented an ‘additional cost headwind’ and the trading environment ahead remained uncertain.
From April, employers will pay a 15 per cent levy on annual staff salaries exceeding £5,000, up from the current 13.8 per cent on wages above £9,100.
But Dunelm, which employs 11,500 staff, still expects its full-year profits before tax to be within analysts’ consensus range of £207million to £217million.
Russ Mould, investment director at AJ Bell, said the guidance looks ‘slightly ambitious’.
He added: ‘There is a real risk that Dunelm’s trading deteriorates in the coming months because of the market backdrop rather than any fault of its own.
‘It might have been better to take an ultra-cautious view of the outlook than hope for the best and subsequently disappoint the market.’
Adam Vettese, market analyst at eToro, said the group ‘will have to find ways to cut costs or increase efficiency elsewhere if they do not want this eating into their bottom line’.
As part of efforts to overcome a difficult trading environment, Dunelm has looked to acquisitions and a diversification of its store offering.
It recently entered the Republic of Ireland after acquiring the soft furnishings business Home Focus at Hickeys, gaining 13 small outlets in the process.
Dunelm, which has typically operated an edge-of-town retail park model, also opened its first Inner London store in Westfield Shopping Centre ahead of the Christmas trading season.
It intends to launch another five superstores in the second half of the 2025 fiscal year.
Boss Wilkinson, who has led the company since 2018, said: ‘As we move into the second half of FY25, we have successfully launched our Winter Sale, which is being well received by customers seeking amazing value across a wide choice of relevant products for the colder months.
‘As we navigate this challenging environment, we see even more opportunities to harness our unique business model, raise the bar on our proposition and fulfil our ambitions as The Home of Homes.’
Dunelm shares fell 3.3 per cent to 996p on Thursday morning, making them one of the FTSE 250 Index’s biggest fallers.
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