Dunelm rewards shareholders as profits rise despite Red Sea disruption

Dunelm has revealed a £71m special dividend package after profits rose in the first half of its financial year, despite operating in “more challenging” trading conditions.

The group posted a 4.8 per cent rise in pre-tax profit to £123m for the six months to December 30, while total sales rose 4.5 per cent to £872. £5 million.

The British home furnishings retailer was able to increase its profit margin despite flagging higher shipping costs linked to the disruption of Red Sea routes.

Dunelm’s performance also faced a sharp slowdown in sales growth to 1 percent in the last three months of 2023 compared to the previous year, when sales rose 17.6 percent.

Dunelm said it was “managing the impact of ships taking longer and more expensive routes by avoiding the Red Sea area”.

It did provide further agreements on higher costs in this regard.

Attacks on ships by Houthi militants in Yemen have disrupted global trade, with shipping giants diverting ships to the southern tip of Africa, a longer and more expensive journey.

Dunelm’s net cash reserve fell by £12m to ££6.2m during the period and diluted earnings per share fell 2.6 per cent to 44.6p per share.

dunelm actions They were down 2.21 per cent or 24.00 pence at 1,061.00 pence on Wednesday, having fallen more than 9 per cent in the last year.

The retailer said that “customers have resisted, but consumer prospects remain uncertain.”

It said recent improvements in profit margins will slow during the second half, as it pointed to higher shipping costs and a drag from currency movements.

An interim dividend of 16 pence per share will be paid to eligible shareholders on April 9, up from 15 pence per share at the same time a year ago.

The board also announced a £71m special dividend of 35p per share. The special dividend will also be paid on April 9 to shareholders of record at the close of business on March 14.

The group, which employs more than 11,000 people, said it was on track to hit full-year profit expectations of £202 million in 2023-24.

Nick Wilkinson, chief executive of Dunelm, said: “Over the last six months we have kept our customers in mind, ensuring our extensive offering has value at its core, while expanding our ranges, introducing new styles and improving the experience in our store. and digital channels.’

He added: “This has been particularly important in a more difficult trading environment and has resulted in another strong sales performance combined with market share gains.”

“Despite continued pressures on consumers, we are encouraged by the wide range of new customers shopping at Dunelm, and existing shoppers also returning more frequently.”

Adam Vetesse, an analyst at eToro, said: “There are some challenges we expect retailers to face, such as inflationary pressure on margins and higher input costs, both of which Dunelm is familiar with.”

‘Containers with duvets are less likely to be diverted due to geopolitical tension, but that is exactly what Dunelm is facing due to attacks in the Red Sea.

“Taking the longer route costs more money and takes longer, which at a time when consumers thought they might put a few pounds back in their pockets due to reduced inflation, will be a bitter pill to swallow.”

He added: “However, pre-tax profit has increased and demand is considered resilient, so if Dunelm can keep these operating costs low as best as possible, this performance can continue throughout the year.” On the other hand, if we see inflation stubbornly delaying rate increases and operational risks remain a sore point, then shareholders will feel some of this pain.’