Dunelm's shares rise as online sales spike but margins drop

 
Alys Key
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Focus on perfecting the new range took a toll on Dunelm's margins (Source: Dunelm)

Shares in furniture retailer Dunelm rose almost six per cent in early trading today after its revenue spiked.

The figures

Revenues grew 24.8 per cent in the 13 weeks to the end of September to £247.9m.

Much of the growth was driven by online sales, which jumped 46.2 per cent to £19.9m and now account for 16 per cent of sales. That figure rose rising to 19 per cent when "reserve and collect" is included.

But margins across the group were chopped down by 2.2 percentage points. This was partly due to the integration of lower-priced Worldstores, which it acquired last year. The rest was down to a "focus on newness" in the latest Dunelm ranges.

Read more: John Lewis is building mini-furniture for the microflats of the future

Why it's interesting

Dunelm warned in September that tougher trading in the UK provided a challenging backdrop for the business. But Neil Wilson, an analyst at ETX Capital, said warnings of this kind have become customary.

“Under promising and over-delivering is a good approach for boards and investor relations departments, but are retailers overdoing ‘post-Brexit tough market conditions’ worries?" he said.

"It’s become almost a reflex, with mentions in virtually every company update this year. UK retail sales numbers continue to show resilience yet the companies who earn their crust in this environment keep on stressing how tough it is."

Read more: Ikea opens its 20th UK store

What Dunelm said

In the absence of a chief executive after John Browett's departure, chairman Andy Harrison said:

"We have maintained the good momentum from the final quarter of the last financial year. Our like-for-like sales were boosted by favourable weather comparatives and, pleasingly, we continue to outperform the homewares market, with strong growth across the business, especially online."

He added: "We head into the second quarter having opened a number of new stores and with an improved seasonal offer for the Christmas period, which we're sure will resonate well with customers."

Read more: Made.com turned a profit in the UK for the first time last year

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