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February 11, 2014 3:18 pm
Dunelm will speed up its store opening programme as the quickly expanding homewares group attempts to bounce back after a summer sales slump.
The homewares group will now open 11 stores, rather than the 10 previously forecast, by the end of its financial year after it benefited from a “smoother planning process” than it had anticipated.
Dunelm’s expansion plans came as it struggled to recover from its poor start to the year, after hot weather over the summer dented sales.
A miserable first-quarter performance meant that like-for-like sales dropped 0.9 per cent for the six months to December 28. Dunelm’s performance improved in its second quarter, with like-for-like sales up 2.9 per cent year-on-year in this period.
Dunelm is highly rated by analysts. The group’s plan to nearly double its estate from 130 stores to 200 is in stark contrast to the rest of the sector where most big retailers are maintaining or cutting the number of their stores.
Analysts at N+1 Singer cited the group’s growing estate as the main investment case for the retailer. “This expansion potential is a key differentiator between Dunelm and many of its retail peers and is the core driver behind the investment case.”
Dunelm has also been cited as one of the companies likely to benefit from the UK’s improving economy. But an improved macroeconomic backdrop – with more people moving house – has not fed through to Dunelm’s overall performance.
Nick Wharton, chief executive, said: “It will be a wee time yet before my average customer starts to feel sufficiently confident [to increase spending].”
The chief executive cited a lag between people moving house and splashing out on homewares. Mr Wharton added: “Confidence in the housing market is a good sign. But fundamentally, [consumers] are still under pressure.”
First-half pre-tax profit rose 3 per cent year-on-year to £61.6m, as online sales rocketed.
Dunelm opened its new warehouse in October, greatly increasing the number of products it could offer online. In its second quarter, online sales accounted for 6 per cent of revenues – up 50 per cent year-on-year.
Mr Wharton said that this figure could reach low double digits, in line with the rest of the non-food retail sector, which makes about 10 per cent of its sales online.
Shares in Dunelm were flat at 909p.
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