Homeware retailer Dunelm has reported a “solid” first-half performance but warned that tougher trading in the run-up to Christmas has weighed on expectations for the full year.

The business said total sales rose 3.6% to £926m in the first half, while second-quarter sales increased by a more modest 1.6% to £498m.

Trading was strongest in the first quarter, with conditions becoming more challenging around Black Friday and into December.

Digital sales continued to grow, accounting for 42% of total sales in the second quarter and 41% across the first half, up two percentage points year on year.

Dunelm said it remained disciplined on promotions despite heightened competition, particularly online and through discounting, which contributed to slower-than-expected sales growth in the second quarter.

Core categories such as bedding, towels and lighting performed well, while Made-to-Measure products again delivered strong growth. Furniture sales were weaker, partly due to availability issues, which the group said it is working to resolve.

The retailer continued to invest during the period, opening a second inner London store in Wandsworth, reopening its Yeovil store following last year’s fire, and launching a new Dunelm app ahead of a wider customer rollout in February. Up to two new superstores are planned for the second half.

Looking ahead, the retailer said profit before tax for the first half is expected to be between £112m and £114m. As a result, Dunelm now expects full-year profit to come in at the lower end of market expectations.

“We delivered a solid first half, and I’m really proud of all our colleagues for their efforts over this busy period,” said Chief executive Clo Moriarty.

“The performance reflected 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 added: “I see multiple opportunities to extend Dunelm’s market-leading position – there is much more in the tank. As such, we are now moving forwards with energy and discipline, actively building new plans whilst executing existing ones to ensure we are the first choice for all home lovers.”

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