Dunelm reports slowdown in sales growth

OUT-of-town homewares retailer Dunelm said on Wednesday that a strong online performance and an upbeat start to the year for its stores was overshadowed by weaker customer numbers through February and March.

The group – which has more than 120 stores selling kitchenware, bedding and rugs, including nine in Scotland – saw like-for-like sales grow by 0.6 per cent in the 13 weeks to 31 March, a slowdown compared to 1.1 per cent in the 26 weeks to 31 December.

Dunelm, which started life as a Leicester curtain stall in 1979, said footfall was “depressed” in February and March at its predominantly out-of-town stores after a strong January.

Sign up to our daily newsletter

The i newsletter cut through the noise

While the group gave no explanation, the softer customer numbers come at a time when petrol prices are on the rise, with the UK average breaking through the 140p-a-litre barrier for the first time last month, although some prices, particularly in rural parts of Scotland, are much higher.

But total sales growth was strengthened by the addition of new superstores in Exeter and Stafford, lifting 10.7 per cent in the third quarter compared to 8.8 per cent in the first half, as part of a drive to increase its portfolio to a total of 200 stores.

However, despite the slowdown in like-for-like sales, the group said its financial position had not changed as it managed to increase its profit margins by 0.3 per cent in the third quarter.

Nick Wharton, Dunelm’s chief executive, said: “It is prudent to remain cautious about the wider economy and, recognising its impact on consumer confidence, we will maintain our disciplined approach to the management of gross margin and operating costs.

“However with a clear growth strategy and strong pipeline of new stores ahead we remain confident in the future prospects for the business.”

Dunelm opened its Greenford store in west London last week and a store in Cambridge is expected before the end of June, which will bring the total number of new stores in the current financial year to 15.

Looking ahead to the next financial year, the group has a total of six units contractually committed, which includes one relocation.

The homewares sector has suffered as consumers cut down on non-essential purchases but Dunelm has been one of the City’s success stories, as its “strong value proposition” has made it resilient.

The group has nine stores on high streets with the rest in edge of town retail parks. This has helped shield it from the poor trading suffered by many town centres, with up to a third of shops empty in some parts of the UK.

Shares opened slightly lower, even though today’s figures were broadly in line with expectations.

Freddie George, a retail analyst at Seymour Pierce stockbrokers, added: “The success of the Dunelm brand is very much on other retailers’ radar screens so, we believe, competition is intensifying – both Next and M&S are developing their home ranges in store and on the internet.”