Dunelm bucks trend as sales rise despite Brits cutting back on household spending

Dunelm has bucked the trend of Britons cutting back on their housing spending, with the town posting higher annual sales and profits.

And it appears the home furnishings giant is appealing to a more fashion-conscious audience, with sales growth among Londoners and younger shoppers aged 16 to 24 in particular.

Customers love custom window treatments, kitchen products and upholstered furniture, Dunelm says.

Dunelm said sales rose 4.1 percent to £1.7 billion in the year ended June 29, following improved performance in stores and online.

Sales growth was driven by a 6.2 percent increase in merchandise volume, which offset a slight decline in the average value of items sold.

Volumes were supported by a 5.1 percent increase in customer numbers, with growth recorded across all age categories, income groups and geographic demographics.

Although the group saw trading slow in the spring and summer due to cooler weather conditions, the group said the summer sale “performed particularly well”.

The Leicester-based company’s pre-tax profit rose 6.6 percent to £205.4 million on higher sales, while gross margins also rose 170 basis points, despite the Red Sea crisis.

Many shipping companies have diverted their ships via the Cape of Good Hope following attacks by Houthi militants, making the journey significantly longer and more expensive.

However, Dunelm said it was able to avoid “any significant impact” from the disruption by “working closely with our freight forwarders to manage the impact of surcharges.”

Nick Wilkinson, CEO of Dunelm, said: “The strong results are testament to the hard work of our agile and dedicated colleagues.

‘At a time when consumers are facing inflationary pressures and competing demands on their disposable income, we have continued to raise the bar on the relevance and value we deliver at Dunelm.’

The UK homewares market has struggled over the past two years as rising interest rates and concerns about the cost of living have dampened Britons’ appetite for renovating their homes.

Dunelm said it was “gradually” seeing promising economic signs but warned the timing of the sector’s recovery “remains uncertain”.

Despite this, the company had a ‘solid start’ to the new financial year and was optimistic about growing its market share to 10 percent in the medium term.

Russ Mould, investment director at AJ Bell, said: ‘The focus on driving online activity, strengthening brand awareness and offering the right products at the right prices in the right places has helped Dunelm become one of the biggest success stories in UK retail in recent years.’

Dunelm Group shares were down 3.6 percent at £11.90 on Wednesday afternoon, making them one of the biggest fallers on the FTSE 250 Index.