No more home renovation boom! Dunelm warns of ‘difficult winter’ ahead for shoppers as sales drop 8%
- Sales in 13 weeks to October 1 down 8.3% to £357m from last year
- Profitability has also declined, but guidance for the year remains unchanged
- Customers are returning to ‘more normal’ shopping habits than during the pandemic
Home goods retailer Dunelm reported lower sales in the first quarter as shoppers limited spending on non-essentials amid rising costs of living.
The group recorded an 8.3% drop in sales to £357million for the 13 weeks to the end of September, compared to the same period last year, when it was boosted by pent-up demand and summer promotions.
Sales were still 36% ahead of the same period in 2019 before the pandemic, which saw locked-down Britons spruce up their homes.
Dunelm said it is seeing a “very good response” from customers to its “winter warm” seasonal products, including rugs, curtains and blankets.
The company left its forecast unchanged for the year, but warned of “a tough winter for consumers” with inflation remaining at a 40-year high of 10.1%.
“The macroeconomic environment remains challenging and our primary objective is to continue to deliver exceptional value and choice to all of our customers, across our wide range of household products,” the group told investors in a business update today. today.
The company, which was founded in 1979 as a market stall selling made-up curtains, now has 177 hypermarkets, mostly on the outskirts of the city.
DIY and furniture retailers, which have profited from the pandemic, have warned of a drop in demand as customers tighten their belts.
In September, home improvement company Wickes and sofa giant DFS said they had both seen a “slowdown” in demand for their products in recent months.
“As we enter what will clearly be a tough winter for consumers, our overriding goal remains to make every book count for everyone, through a tight grip of operations,” the chief executive said. of Dunelm, Nick Wilkinson.
Online sales accounted for a third of its total sales, in line with the previous year, according to the group.
He added that he was seeing a “very good response” from customers to his “winter warm” seasonal products, including rugs, curtains and blankets.
But profitability fell in the first quarter, with gross profit margins 130 basis points lower than a year ago as customers returned to “more normal” shopping habits after the pandemic.
Dunelm shares fell 2.4% to 786.50p in morning trading on Thursday. They are down about 40% compared to last year.
Lara Martinez, analyst at Third Bridge, said the company could continue to outperform the market thanks to its value proposition.
“Dunelm could benefit from lower shoppers like John Lewis, but they have discounters like B&M hot on their heels,” she said.
“We expect to see investments in offline advertising to drive customer acquisition.”