Dunelm sees profits fall despite record sales in difficult year
- Group profit before tax fell 7.8% to £192.7m for the year
- Despite the retailer achieving record sales of £1.4bn
Dunelm saw its profits fall despite achieving record sales amid a “period of great economic uncertainty”.
The home goods retailer said pre-tax profits fell 7.8 per cent to £192.7 million for the 52 weeks to 1 July.
Dunelm achieved record sales of £1.4bn, up 5.5 per cent on last year but below the level of consumer price inflation reflecting the rise in prices over the past year.
CPI inflation reached 6.8 percent today, below expectations, which could lead the Bank of England to moderate its pace after this week’s planned base rate increase to 5.5 percent.
An end to rate rises could be a boost for Dunelm as it would ease pressure on the property market caused by rising mortgage rates which is hitting consumer demand to upgrade their homes.
Dunelm’s profits fell 7.8 per cent to £192.7 million in the 52 weeks to July.
Nick Wilkinson, chief executive of Dunelm, said: “In a period of great economic uncertainty, we have maintained our focus on improving our customer proposition, expanding our offering whilst remaining fully committed to value and making every pound count.”
‘As we manage the current challenges, it is crucial that we do not lose sight of our long-term ambitions. “We are committed to raising the level of value and joy for our clients and continuing to invest where we see good returns, so we can take advantage of the various opportunities ahead.”
Dunelm also revealed that net debt increased to £30.7m, an increase of £6.9m on last year’s result of £23.8m.
dunelm actions They were down 0.74 per cent at 1,075.00 pence in morning trading on Wednesday.
The retailer was a pandemic winner as landlords spruced up their properties, sending Dunelm shares over 1,500p. Shares halved to lows below 700p last September, but Dunelm shares have since recovered and are up 37.6 per cent over the past year and 8.4 per cent this year .
In a note to clients in July, analysts at Royal Bank of Canada (RBC) said consumers were being forced to spend more selectively due to rising mortgage rates and higher food prices.
The brokerage downgraded Dunelm shares to “underperform” from “sector perform” and cut the price target to 1,000p from 1,300p.
“Dunelm remains a well-run company, with a strong position in the UK home furnishings market,” RBC brokers said.
“However, given the weakness in the housing market and continued pressures on consumer spending, we expect Dunelm to struggle to achieve growth in the near term.”
Neil Shah, director of Edison Group, said: ‘Dunelm is filling its coffers with more and more funds by today announcing an impressive turnover in excess of £1.6bn.
‘A 5.5 percent increase in total sales year-over-year and a jump in market share to 7.2 percent indicate a solid foundation, even though its pre-tax profit margin declined slightly.
“While current market dynamics may remain capricious, Dunelm’s roadmap presents a promising outlook for FY24.”
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