Dunelm has consolidated its position as operator of the largest number of homeware stores in the UK – ahead of John Lewis – with a further expansion of its chain that helped boost its pre-tax profits.

While the rest of the retail sector hunkered down amid the economic gloom, Dunelm opened 10 new stores in the last six months of 2012, and committed to opening another six.

The new stores helped to lift profit before tax by 14.6 per cent to £59.8m. Dunelm now has 124 superstores across the UK, and is targeting a chain of 200.

Nick Wharton, chief executive, said that 200 represents the upper limit for Dunelm’s store expansion in the UK.

“We’ve looked at the size of catchments,” he said. “We’ve looked at the demographics and built in the impact of multi channel, and that suggests around 200 catchments that would support a Dunelm [outlet].”

Dunelm’s revenues rose 13.4 per cent to £340.1m, including the new stores. On a like-for-like basis, sales rose 2.2 per cent and diluted earnings per share jumped almost a fifth to 22.1p.

The store expansion gave the group nearly 7 per cent of the total homeware market at the end of 2012, according to Verdict, the consultancy group.

Dunelm also invested heavily in advertising during the second half of the year, increasing its spending on national campaigns. “We have completed the transition from local press to national press,” said Mr Wharton. “We’re now in the nationals 40 weeks a year.”

The group also launched a biennial catalogue. “In our market, the catalogue brings our products to life,” Mr Wharton explained. “It gives it a bit of coffee table longevity.”

Online sales still account for only 4 per cent of the group’s turnover, although management said it expects this to double in the next few years, aided by more flexible home delivery slots.

“We don’t see our market moving to a majority of online sales. Our customers enjoy our store experience,” said Mr Wharton. “There’s an element of our products that are tactile and colour-led.”

Although Dunelm’s cash generation fell slightly in the period, it still represented 107 per cent of operating profit, leading analysts at Panmure Gordon to forecast a “generous capital return” in two to three years.

Dunelm has been one of the retail sector’s star performers in share price terms since it floated in 2006 at 170p a share. On Tuesday, shares in the group closed at 780p, down 1.5 per cent.

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