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Dunelm profits soar 34%, but cost of living pressure “continues to mount” CEO warns

Dunelm: sitting pretty, but what lies ahead?

Dunelm continues to ride high as shopper habits change, seeing profits grow significantly year-on-year for FY22, rising 34% from £157.8m in 2021 to £209m. 

Sales at the retailer were up 16% for the year, hitting £1.55bn with an increasing proportion of sales once again taking place in stores.

According to the latest numbers, digital sales now account for 35% of the total, down from 46% last year. This is still, however, two and a half times higher than pre-pandemic 2019 levels, says the company.

Sales across channels were boosted by a Summer sale event, which helped release pent-up demand, says the retailer’s CFO, Karen Witts. The company also saw customer numbers continue to climb, up 8.5% for the year. 

Growth has been driven by market share gains with significant further headroom in both homewares and furniture, adds Witts. 

Looking ahead, CEO Nick Wilkinson says: “ [We have had a] very strong performance in FY22 and we are a bigger, more resilient and more ambitious business than three years ago.” 

However, he warns, that “Cost of living pressures will continue to mount, with high inflation this year and maybe beyond. Consumer reaction is unpredictable, but our primary focus remains on offering outstanding value and the required response plays to the proven strengths of our resilient and advantaged business model.” 

An indication of what lies ahead, he says, may come from sales remaining robust in the first 10 weeks of the new financial year and the company, currently, is on track to deliver FY23 results in line with analysts’ expectations.

Commenting, Joshua Warner, Financial Markets Analyst at City Index, says: “Dunelm enjoyed a solid year, with pre-tax profit rising by almost a third to hit record highs and the homeware retailer continuing to gain market share.  Sales have remained robust in the initial weeks of the new financial year, but it looks set to be a more challenging 12 months as consumers tighten their purse strings in the inflationary environment. It has already warned that profit could drop almost 15% this year as sales growth is set to stall to less than 1% and its gross margin is set to contract slightly.”

Warner adds: “Dunelm has proven its ability to adapt to rapidly changing situations. A wide product range at different price points should allow customers to trade down if necessary, a focus on the essentials means it enjoys shorter replacement cycles, and the fact it is largely own-brand and sources its products from committed suppliers all bode well for the company – and investors will want to see these advantages flexed in an increasingly tough environment.”

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