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Dunelm grows profits in first half


Out-of-town homeware retailer Dunelm Group has increased profits in the first half of its financial year, according to a trading statement published today.

The company saw operating profits grow 5.4 per cent to £48.4 million and pre-tax profits rise five per cent to £48.5 million.

Caution remains, however, with like-for-like (LFL) sales failing to mirror last year’s impressive upward trend.

During the 26 weeks to January 1st LFLs dropped 1.2 per cent compared to a 15.4 per cent increase for the same time one year before, prompting Deputy Chairman Will Adderley to call it a period of “consolidation” for the group.

H1 revenues at Dunelm were up 8.5 per cent year-on-year, rising to an impressive £275.7 million, while gross margin grew 110 basis points to 49.1 per cent.

Other developments in the first half of the financial year included the opening of seven new superstores and a commitment to three further units before the end of H2.

Online operation Dunelm Direct continued to expand, while the 26-week period also saw the completion of the group’s central warehouse extension.

Adderley commented: “After exceptional growth in sales and profits in the equivalent period last financial year, the most recent half year has been a period of consolidation.

“In this context it has been a substantial achievement for the business to record another profit increase as well as continuing its record of strong cash generation.”

Although today’s figures are positive for Dunelm, the homeware sector is likely to face many challenges in the coming months, with various commentators suggesting that consumers will tighten their purse strings as economic pressures mount.

Consulting Director of Verdict Research Neil Saunders called Dunelm’s latest financial statement “a robust set of numbers”, but issued a warning about the forthcoming battle for market share in a squeezed sector.

“Organic growth across most home sectors, including homewares, DIY and furniture, was almost non-existent across the last half of 2010 and will remain that way throughout most of 2011,” he explained.

“This means the only way for retailers to grow sales is to steal market share from other players.

“This is something that smaller players like Dunelm can accomplish, but is much more difficult for larger players with well established store networks.

“Given the background it is inevitable we will see more casualties and store closures in the home sector.”

Published on Thursday 17 February by Editorial Assistant

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