Dunelm scales back outlook after weak festive sales

(Sharecast News) - Homewares retailer Dunelm has said it expects full-year profits to come in at the lower end of market forecasts as a result of a "challenging environment" in the first half, in which sales growth slowed significantly towards the end of 2025. Sales totalled £498m over the second quarter to 27 December, up just 1.6% year-on-year, following a 6.2% jump in the first quarter, which the company said reflected consumer behaviour and tough trading conditions during Black Friday and December.

"As in recent years, we also continued to be disciplined in our promotions during this period, but this year we saw an especially high level of competitive activity in both digital marketing and discounting. As a result, Q2 sales were softer than anticipated at +1.6% year-on-year," Dunlem said.

Growth was experienced across the core categories of bedding, towels and lighting, along with strong growth in the Made-to-Measure service, but the company saw softer trading in furniture, partly due to availability problems.

Sales across the first half overall were up 3.6% at £926m, while the gross margin rose 60 basis points, though that was primarily driven by FX tailwinds.

As a result, full-year pre-tax profit is now expected to be at the bottom end of the £214m-227m consensus range.

Chief executive Clo Moriarty labelled the trading performance as "solid... reflect[ing] a strong first quarter followed by a more challenging close to the half".

"Whilst the UK retail environment remains variable, we have acted on some clear lessons from the first half, including targeted steps to improve availability, ensuring customers can access our fantastic ranges seamlessly, however they are shopping with us," Moriarty said.