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Dunelm sees strong sales offset by slowing online growth and sliding revenues

Dunelm: sitting pretty, but what lies ahead?

Dunelm: sitting pretty, but what lies ahead?

Despite challenging economic conditions, Dunelm has once again recorded strong sales for the half ended January 2023, generating £835m in sales. The retailer continues to grow its online business, with digital sales accounting for 34% of the total, compared to 33% in H1 2022.

Active customers are also 5.7% higher than last year, with 4.8% increase in shopping frequency.

Revenues, however, are 16.6% down on the half year to January 2022, reflecting rising costs of labour and materials.

Nick Wilkinson, Dunelm Chief Executive Officer, comments: “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.

“In this environment, agility, creativity and innovation are more important than ever and we have endeavoured to make every pound count, both for ourselves and for our customers, helping to mitigate the impact of inflation. While we do this, it is important that we also maintain our long-term thinking, invest for sustainable growth and continue to ensure we are in a position to seize the significant opportunities ahead of us. 

“Much like during the pandemic, our customers, colleagues and the communities we operate in will remember how businesses behaved when times were tough, and we are confident that our approach of offering outstanding value and choice for all will enable us to – once again – emerge from this challenging period stronger than ever.”

Russell Pointon, Director of Consumer at analyst firm Edison Group adds:  “Having provided details of strong trading for Q2 with y-o-y sales growth of 18% and expected lower gross margin in January, the interim results reported today highlight a drop in pre-tax profit of 17% to £117.4m.

“Following the upgrades to estimates that occurred after the January update, management has indicated their own expectations for full year profits are unchanged, a reduction from the £213m reported in FY2022.  

“Dunelm has demonstrated remarkable resilience despite the headwinds of rising living costs and has recovered exceptionally strongly from the effects of the COVID pandemic through range extensions that have led to good market share gains. The company’s product assortment has proven to be a winning formula as customers navigate through the cost-of-living crisis and the chilly weather, with the Winter Warm range being particularly appealing amidst rising energy bills.  

“However, the escalating input costs continue to pose a challenge. While the Group’s value-driven offerings remain popular, it is not impervious to the tough retail landscape as consumers are keeping a close eye on their spending. 

“With online sales growth starting to plateau, the company needs to maintain a keen focus on catering to budget-conscious shoppers while also providing good value to prevent them from gravitating towards other budget homeware retailers.”

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