Dunelm has blamed a “weaker market” for its “slightly softer” trading update, and said price hikes are inevitable as it works to maintain profit margins in the wake of the collapsed sterling.

The homeware retailer said in its interim financial report for the 26 weeks to December 31 that costs were starting to rise and these would be passed on to consumers.

According to reports, 22,500 products out of 30,000 lines will see price rises due to the weakened pound that came about after the Brexit referendum, and the sharp rise in import costs as a result.

“Margin was impacted by the depreciation of sterling against the US dollar, both as a result of some cost price increases from direct to store suppliers, and hedges on directly imported products starting to unwind,” Dunelm stated in its report.

READ MORE: Dunelm welcomes sales growth despite flat like-for-likes

“Retail prices have been increased on a small number of products to negate the impact to margin; we expect to put through further price rises on a number of categories in the second half, allowing gross margin to remain broadly flat in the second half, compared to the same period last year.”

The retailer said like-for-like sales fell 1.6 per cent in the 26 week period, with comparable store sales declining 3.1 per cent.

Profit before tax declined 13.6 per cent to £65.2 million, but total revenue inched up by 2.8 per cent to £460.5 million, boosted by strong online growth and five new store openings in the period.

Finally, in November, Dunelm spent £8.5 million to acquire WS Group, which consists of Worldstores, Achica and baby retailer Kiddicare.

READ MORE: Dunelm doubles online operation with £8.5 million acquisition

As a result of the deal, the retailer racked up an exceptional cost of £9.3 million.

“We are in a transitional year for Dunelm and it has been a particularly busy first half – whilst we are operating in a challenging retail environment, especially in homewares, we remain focused on investing in and developing our business for the future,” Dunelm chief executive John Browett said.

“Whilst trading was slightly softer than we would have liked due to a weaker market, we continue to increase our share and are confident that we will emerge as an even stronger market leader.”

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