Dunelm profits hit new record high but outlook clouded by consumer spending squeeze

Homewares retailer Dunelm has seen annual profits hit a record high, even as the group cautioned over an “extremely challenging” economic backdrop.

The chain reported that pre-tax profits jumped by almost a third to £209 million on a pro forma 52-week basis, up from £157.8m the previous year.

It said sales had remained “robust” in the first ten weeks since its July 2 year-end, although they were lower than a year earlier when trading was boosted by a delayed summer sale and the reopening of stores as Covid-19 restrictions were lifted.

But its costs have been soaring, with inflationary pressures - mainly on staff wages - adding a further £17m to its annual operating expenses, and it said it would “continue to relentlessly focus on making every pound count”.

Dunelm also said it increased pay by more than 7 per cent on average for its 11,000 workers to help with the cost-of-living crisis.

The group stuck by forecasts for the new financial year in spite of the gloomier consumer spending outlook and cost woes.

Chief executive Nick Wilkinson said: “We feel confident and well prepared to weather the current economic pressures - we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again. That said, the operating and economic environment is extremely challenging.

“In this environment, we have to make every pound count, both for ourselves through our tight operational grip and cost discipline, and for our customers, through our offer of outstanding value at all price points.”

Russ Mould, investment director at AJ Bell, noted: “Looking in the rear-view mirror Dunelm can only see sunny skies as it reports another record profit. But a glance through the windshield reveals a massive consumer cloud about to break over the business.

“For now, the company is sticking with full-year forecasts. But even Dunelm can’t change the economic weather and it seems likely sales will eventually suffer as people wait a bit longer to replace that duvet set or pair of curtains.”

The group saw total sales jump 16.2 per cent, with online sales accounting for 35 per cent of turnover, up from 20 per cent in 2018-19. It said it increased pay by more than 7 per cent on average for its 11,000 workers to help with the cost-of-living crisis.