Dunelm crashes after profit warning

The company said on Friday that underlying profits for the year are likely to be "moderately below" those delivered in 2017 following "materially more challenging" than expected trading conditions in the fourth quarter.

Like-for-like store sales are down 4.7% in the quarter to date due to reduced footfall to stores. Although online LFL sales jumped an impressive 43.7%, total LFL sales were up just 0.1% in the quarter. Meanwhile, non LFL online sales from WorldStores, Kiddicare and Achica, have continued to reduce, as expected, partly reflecting the disposal of the Achica business.

As a result, the company now expects profits for the year to be moderately below the £109.3m seen in 2017. RBC Capital Markets said this would represent a downgrade of 6% to Bloomberg consensus profit before tax expectations of £114mn for this year and assuming little growth for FY19 a 10-15% downgrade for FY19.

Chief executive Nick Wilkinson said: "We have seen an unexpectedly challenging start to the fourth quarter, with continuing softness in the homewares market and reduced footfall to our stores. We are making good progress on our strategic plans to be a truly multi-channel retailer and further strengthen our customer offer.

"We will learn from recent trading and I remain optimistic about our ability to deliver strong sales and profit growth in the future."

RBC said: "Short term we think the market will be disappointed by both the content of the release, coming so soon after a more encouraging Q3, and also its timing. However, Dunelm is cash generative and should offer some downside protection given its +5% dividend yield and majority 51% Adderley family control.

"This statement is negative for sentiment on other general retailers with homewares/housing related exposure - e.g., Kingfisher, BME, Next, Marks & Spencer- however we think it is largely company specific."

At 1500 BST, Dunelm shares were down 15% to 522.12p.