Wednesday 4 September 2019 12:19 pm

Dunelm shares slide despite strong profit growth

Shares in Dunelm slumped this morning despite strong profit growth as the homeware retailer warned of a challenging year ahead. 

Dunelm shares were down as much as nine per cent after it reported cautious outlook for the year ahead as Brexit uncertainty weakens consumer confidence.

The figures

Profit before tax was up 23.4 per cent in the 52 weeks to 29 June, from £102m in 2018 to £125.9m this year. 

Total revenue increased 4.8 per cent from £1.05bn to £1.1bn.

Free cash flow soared 191.9 per cent from £52.9m to £154.4m and net debt shrunk from £124m to £25.3m.

Basic earnings per share were 50.2p, up from 40.1p. 

The firm announced a 5.7 per cent increase in its ordinary dividend to 28p and a special dividend of 32p. 

Why it’s interesting  

Sales were boosted as social media encouraged customers to spend more on homeware, the company said.

The emergence of homeware and interiors “influencers” has changed the face of the traditional Dunelm customer. 

Shoppers are more focused on digital content, more resourceful online and eager to be a “smart and savvy” consumer, the retailer said. 

“We believe that Dunelm is benefiting from these trends,” the company said in today’s statement.

“We are becoming part of the portfolio of more homewares consumers, across more categories.

“Put simply, where once we may have been the place where a customer bought their quilts or curtains, we are now being considered for a wider range of products.”

Dunelm also warned that it remained cautious over the outlook for consumer confidence due to Brexit. 

As it stands the UK is set to leave the EU on 31 October, which falls in the run up to the retailer’s peak Winter season. 

What Dunelm said

Chief executive Nick Wilkinson said: “Whilst recent trading performance has continued to be strong, we remain cautious about the full year outlook due to ongoing Brexit uncertainty and specifically the impact it may have on consumer spending as we enter our peak period. 

“Looking to the future, I am excited about the potential to grow the business as we enhance and extend our specialist and multichannel offer, build on our market leading position and fulfil our purpose to help everyone create a home they love.”

What analysts said

“Why is it doing so well when others aren’t? One can speculate that a slowdown in the housing market has prompted many people to rethink plans to move home and instead do up their existing property – thus creating a reason to visit Dunelm’s stores or shop on its website,” Russ Mould, investment director at AJ Bell, said.

“Dunelm itself suggests it is doing well because people now think of the brand for a broader range of items than the historic association with quilts and curtains.” 

Main image credit: Getty