Dunelm cites inflationary pressures as H1 profits fall

In the 26 weeks to the end of December 2022, pre-tax profit fell 16.6% to £117.4m. Dunelm said this was as expected as the same period a year earlier had benefitted from a rescheduled Summer sale and particularly high levels of store sales as stores reopened after the pandemic, and due to inflationary impacts.

Total sales grew 5% to £835.0m. Compared to the first half of FY20, before the pandemic hit, total sales were up 43%. Customer numbers rose 5.7% and shopping frequency grew by 4.8% during the half.

Dunelm said the period was characterised by "more external uncertainty, during which inflationary pressure on consumers was high".

The retailer hailed a "strong" Winter sale and backed its expectations for FY23 pre-tax profit as it said that customers have been resilient to date, but that "the consumer outlook remains unpredictable".

Chief executive Nick Wilkinson said: "We are all learning to live in a new, complex and rapidly evolving economic reality. Recognising this, our focus has been on ensuring that we continue to offer outstanding value to our savvy customers through a proposition which is committed to quality, at the right price, across an expanding range of relevant products.

"We believe that this is why we have continued to grow our sales, customer numbers and market share."

Dunelm lifted its interim dividend by 7.1% to 15p a share.

At 0925 GMT, the shares were up 0.6% at 1,175.69p.

Russ Mould, investment director at AJ Bell, said: "A drop off in first-half profit at Dunelm isn’t causing undue alarm. The impact of inflationary pressures was hardly an unknown for investors and the company was competing with strong post-Covid trading as well as being affected by the timing of its big sale.

"More importantly the company is sticking with its full-year forecast and delivered meaningful sales growth during the period - suggesting it is picking up market share from struggling rivals.

"Dunelm’s proposition is not particularly complicated but it has been honed over time and is now very well attuned to consumer needs and trends.

"Its products are affordable but not so low quality as to prove a false economy. In recent years it has sorted out the digital side of its business - just in the nick of time before the pandemic hit as it turned out.

"It has also got the basics of retail right. Things like making sure it has the right stock in the right place and carefully managing its cash.

"Undoubtedly the consumer backdrop is challenging, but Dunelm’s strengths should help cushion any cost-of-living blow."