Dunelm sees FY profit at lower end of market expectations

(Sharecast News) - Homeware retailer Dunelm reported a rise in third-quarter sales on Thursday but cautioned that full-year profit would be towards the lower end of consensus expectations as events in the Middle East have dented consumer confidence. In an update for the third quarter, the company said total sales rose 2.1% year-on-year to £472m, with digital participation up 2 percentage points to 43%. Total year-to-date sales were up 3.1% at £1.4bn.

Dunelm said Q3 started well, with growth in line with the first half performance, following a good Winter sale and a positive response to new Spring ranges. "The universal appeal of our offer continued to resonate with customers, however more recently, and particularly in March, we experienced a period of broad-based softening," it said.

The company highlighted a strong calendar of events for the fourth quarter and confidence in its ability to continue to deliver a "compelling proposition" to customers. However, it said global events have resulted in "a more uncertain external environment" and it is not assuming any immediate improvement to consumer confidence.

As a result, pre-tax profit for FY26 is expected to be towards the lower end of consensus expectations of £210m to £217m.

Chief executive Clo Moriarty said: "We saw further sales growth in Q3, against an uncertain backdrop for both customers and businesses.

"Although the external environment is not helpful in the short term, we continue to focus on the areas within our control - strengthening our proposition while operating efficiently and effectively. Alongside this, we are making good progress building our long‑term growth plans with some exciting developments beginning to emerge, including a much stronger store opening pipeline and some encouraging early results from our recently launched app.

"Our final quarter provides multiple opportunities for Dunelm to stay front of mind for customers, including our popular Summer Sale. We remain confident that our comprehensive offer will continue to resonate with homelovers."

At 0945 BST, the shares were up 5.3% at 803p.

Dan Coatsworth, head of markets at AJ Bell, said: "A decent quarterly showing wasn't enough to cushion the blow for Dunelm shareholders as it guided for full-year results at the lower end of market expectations.

"Consumer confidence has been rocked by the energy shock created by the conflict in Iran. While costs aren't expected to see too big of an impact immediately, Dunelm knows inflationary pressures are coming down the track.

"With demand for furniture and homewares having strong ties to the housing market, the cracks emerging in property demand are also unhelpful.

"Trading in the latter part of Dunelm's third quarter helps explain why it is so circumspect about what's coming, with the reference to 'broad-based softening' in March a gentle way of saying customers are buying significantly less of its wares in every category.

"Dunelm must now balance discounts to entice shoppers to spend while not undermining its margins too much or damaging the integrity of the brand in the longer term.

"Dunelm has built its success on offering decent quality products at affordable prices underpinned by a low-cost operating model. It will need to lean on these strengths to help weather the current period.

"All Dunelm can do is focus on what it can control, and the company looks set to continue with a path of enhancing its digital offering while also rolling out more physical stores."

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