Homewares retailer Dunelm sees sales jump despite supply chain concerns

Dunelm has reported growth in first-quarter sales, although not as much as it enjoyed from last year's post-lockdown boost, while the homewares retailer also flagged ongoing challenges with supply chain issues.

The group reported an 8.3 per cent increase in sales to £388.8 million in the 13 weeks to September 25 compared to the same period a year ago, when sales soared by 36.7 per cent thanks to pent-up demand following the initial Covid lockdown period.

It marks a sharp slowdown in sales growth, given the tough year-on-year comparison, but Dunelm said total sales jumped 48 per cent on a two-year basis.

Online sales were up 20 per cent, making up a third of all sales, down from 46 per cent growth in the previous year when stores were impacted by closures.

Dunelm recently revealed it was raising prices on some products as a result of inflationary pressures hitting supply chains.

Releasing a trading update to investors, the group cautioned over an "uncertain" outlook in the wider economy, clouded by the UK and global supply chain disruption and rising costs due to freight and driver shortages, but stuck to its recently upgraded profit guidance.

It added it was weathering the storm thanks to good stock levels and with customers able to switch products if availability of certain lines are impacted.

But Dunelm recently revealed it was raising prices on some products as a result of inflationary pressures hitting supply chains, and was offering incentives to lorry drivers to keep trucks moving.

It comes as other big names in the retail sector, such as Next, warned over price rises for homewares, which are particularly affected by rising freight costs.

Dunelm noted: "The macro outlook remains uncertain, in particular regarding supply chain disruption and inflationary pressures from freight and driver shortages.

"Whilst we are not immune to the challenges being widely reported, we feel well placed relatively to manage them.

"In particular, we have good stock levels across our stores, warehouses and supplier partners, a low proportion of seasonal ranges within our product offer, and also benefit from a higher propensity for customers to substitute products within homewares categories, given our broad range."

The group recently announced plans to hand a £132m special dividend payout to shareholders after seeing profits soar 44.6 per cent to £157.8m.

Keith Bowman, equity analyst at online investment service Interactive Investor, said: “Home-furnishing retailer Dunelm has made a robust start to the new financial year and remains confident that it can manage through current supply chain challenges.

“Total first-quarter sales rose by 8.3 per cent to £388.8m aided by its summer sale, improved product availability and some new ranges of furniture. Digital sales have continued to grow.

“Previously raised full-year profit expectations have been maintained and Dunelm’s outperformance of the homewares market is ongoing under management data estimates.

“For investors, cautionary comments regarding the uncertain macro outlook cannot be ignored. Supply chain challenges still need to be navigated, while rising costs for consumers generally may eventually crimp spending.

“But sales momentum remains with the group’s investment in its digital channels being rewarded. Room for market share gains persists,” he added.

A message from the Editor:

Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions