Shares in Dunelm Group have fallen by almost a fifth today after the UK homewares retailer warned full-year profits are now expected to come in at the lower end of market expectations.
The update – and subsequent 17.6% share price dip – comes despite posting a solid first-half performance.
The retail giant’s total sales rose 3.6% to £926 million in the first half of its financial year, helped by continued growth in its core categories and stronger digital participation, with online-related sales accounting for 41% of total revenue.
However, the group said trading became “more challenging” in the second quarter, with Q2 sales up just 1.6% to £498m, following stronger momentum in Q1.
Dunelm said the tougher performance was particularly evident around Black Friday and into December, as competition intensified across the market.
It added that it stayed “disciplined” in promotions during the period but faced “an especially high level of competitive activity” in both digital marketing and discounting, which weighed on sales.
Despite the slower sales growth in Q2, the company’s gross margin remained strong, rising 60 basis points year-on-year in the first half, primarily driven by FX tailwinds.
It now expects first-half profit before tax of approximately £112m to £114m.
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The business continued to invest in its customer proposition, including opening its second inner London store in Wandsworth, reopening its Yeovil store following a fire, and progressing plans to open up to two more superstores in the second half.
A new Dunelm mobile app is now live on Apple and Android, with a full customer launch planned for February.
“We delivered a solid first half, and I’m really proud of all our colleagues for their efforts over this busy period,” said CEO 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.
“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.”
Despite optimism from the top, investors reacted negatively to the update and the firm’s share price has dropped by over £2 to 964p so far today (12:00pm).
The Leicester-based firm’s market cap is now just under the £2 billion mark.
Dunelm will publish its interim results on 10th February.