Dunelm drives on as first half sales remain strong

Homewares and furnishings retailer Dunelm has reported strong sales during its first half despite a challenging second quarter.

According to its latest trading update for the 26-week period ended 30 December 2023, total sales rose by 4.5% to £872m, driven by volume.

Dunelm said that growth continued in Q2, with total sales increasing by 1.0% against very strong comparatives (underlying Q2 growth was 14% last year) and challenging market conditions. The digital sales mix was up 2ppts to 37%.

During the period, the retailer opened three new stores, taking the total to 183, and remains on track to achieve its full year store opening plans.

Dunelm added that pre-tax profit expectations for the full year are in line with market expectations, with company compiled consensus average of analysts’ expectations for FY24 PBT is £202m, with a range of £199m to £207m.

“We are pleased to report strong sales growth of 4.5% during the first half, with 1.0% growth delivered in Q2, driven by volume, against a particularly strong comparative period when sales grew by 14% on an underlying basis,” Dunelm said. “We are confident that we are continuing to gain share4 in a market which has been characterised by volatile week-to-week trading patterns, particularly through Q2, reflecting the ongoing pressures on consumers’ discretionary spend.

“Customers continued to be attracted to the choice and value we consistently offer across our ranges. We were particularly pleased with sales in our cook and dine category, which benefitted from improved ranges as we have developed our product mastery, and strong sell through of our Christmas products.

“We delivered sales growth whilst also achieving significant improvements in gross margin, evidencing our ability to offer outstanding value alongside disciplined promotional activity. Gross margin in H1 was 160bps higher than FY23, benefitting from improvements in freight rates, which were slightly better than expected. We expect headwinds in the second half, however we remain comfortable with our guidance for a year-on-year gross margin increase of c.100bps.

“Growth in the first half was driven by customer demand for our consistent, outstanding value proposition. Whilst we are conscious that the outlook for consumer spending remains unpredictable and market conditions volatile, we are confident that we can deliver further market share gains and retain our tight operational grip on costs. Our expectations for full year PBT are in line with market expectations.”

Nick Wilkinson, Chief Executive Officer, added: “The breadth of our range and outstanding value of our proposition continues to be well received by customers, resulting in a strong sales performance for the first half despite a tough market backdrop.

“Consumers remain under pressure and are actively seeking true value at all price points. Our customer offer and positioning as the ‘Home of Homes’ resonates particularly well in this environment, and we are confident we have continued to gain market share. At the same time, our strong operational grip continues to help us navigate the difficult environment and manage our margins.

“Supporting our communities remains at the heart of Dunelm and I would like to thank all our colleagues and customers for making our recent Delivering Joy campaign our biggest ever, donating an incredible 125,000 gifts to local good causes during the Christmas period.

“Looking ahead, we remain excited about the compelling opportunity for growth for our business. We have continued to execute at pace on our strategic plans, opening four new stores over the first half of the year, whilst continuing to expand our ranges and improve our digital offer. Our new Spring collections look fantastic in store and are being really well received by customers as we reach the end of our Winter Sale, leaving us well placed to make further progress in the months ahead.”

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