Home Money Dunelm sales ignore ‘challenging’ market, but budget impact weighs

Dunelm sales ignore ‘challenging’ market, but budget impact weighs

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Brighter room: Dunelm noticed strong demand for furniture products, including its collections of dining chairs, coffee tables and sofas.
  • Dunelm’s turnover rose 1.6% to £490m in the quarter to 28 December.
  • The retailer saw 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 difficulties” ahead of the second half of its financial year.

The Leicestershire-based home goods retailer’s turnover rose 1.6 per cent to £490 million in the 13 weeks ending December 28 and 2.4 per cent to £894 million during the first half of your financial year.

Online shopping as a percentage of total sales grew three percentage points in both periods, to 40 percent in the second quarter and 39 percent in the first half, thanks to the increase in 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 home goods and property renovations.

Dunelm has bucked the trend with continued sales growth, which it has attributed in part to expanding its ranges and relatively high demand among younger consumers.

But the company warned that the upcoming rise in National Insurance rates announced in the Autumn Budget represented an “additional cost headwind” and that the future business environment remained uncertain.

Brighter room: Dunelm noticed strong demand for furniture products, including its collections of dining chairs, coffee tables and sofas.

From April, employers will pay a 15 per cent tax on annual staff salaries above £5,000, up from the current 13.8 per cent on salaries above £9,100.

But Dunelm, which employs 11,500 people, still expects its full-year pre-tax profits to be within analysts’ consensus range of £207m to £217m.

Russ Mold, chief investment officer at AJ Bell, said the guidance appears “slightly ambitious.”

He added: “There is a real risk that Dunelm’s operations will deteriorate in the coming months due to the market context and through no fault of its own.”

“It might have been better to take an ultra-cautious view of the outlook than to hope for the best and subsequently disappoint the market.”

Adam Vettese, market analyst at eToro, said the group “They will have to find ways to reduce costs or increase efficiency elsewhere if they don’t want this to affect their bottom line.”

As part of efforts to overcome a difficult trading environment, Dunelm has sought acquisitions and diversification of its store offering.

It recently entered the Republic of Ireland after acquiring the Home Focus soft furnishings business in Hickeys, gaining 13 small outlets in the process.

Dunelm, which has typically operated a retail park model on the outskirts of the city, also opened its first central London store at the Westfield shopping center ahead of the Christmas shopping season.

It intends to open another five hypermarkets in the second half of fiscal 2025.

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 looking for incredible value in a wide variety of products relevant for the colder months.

“As we navigate this challenging environment, we see even more opportunities to leverage our unique business model, raise the level of our proposition and deliver on our ambitions as The Home of Homes.”

dunelm actions fell 3.3 per cent to 996p on Thursday morning, making it one of the biggest fallers on the FTSE 250 index.

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