There is not much soft about the soft-furnishings market. The sector has already seen the demise of some well-known names, and those retailers left standing are determined to hold on to sales.
Will Adderley, chief executive of Dunelm, the home furnishings retailer founded as a market stall by his parents, is keen to defend his company’s fast-expanding market share.
The company has recently picked up sales at both the higher and lower ends of the market and Mr Adderley told the Financial Times that he expected to keep the company’s new customers after the recession had ended.
He said: “We have captured those markets and we have no intention of losing them. We don’t want to be heroes just for the next five months.”
Dunelm is an out-of-town retailer with a strong record on controlling costs, which has helped it to undercut its department store rivals and attract mid- to upmarket shoppers. It expanded its more expensive ranges in 2008 with the purchase of luxury linen maker Dorma, although Mr Adderley said that he had no plans for any future similar acquisitions.
At the other end of the market, Dunelm has benefited from the failure of both Woolworths and Rosebys.
Dunelm has been praised by some of its peers as one of the most successful retailers in the UK after the recently listed family business increased like-for-like sales by 16.1 per cent over the summer and announced the creation of 1,000 jobs.
But Mr Adderley, who has worked in the business since he was a child when he used to help run the Leicestershire market stall with his parents, has remained modest and – at times – disarmingly honest about the company’s performance.
On the day Dunelm announced its summertime jump in sales, sending the share price to a record high, Mr Adderley told the FT: “We think the market is still declining. We can’t fully square these figures.”
Mr Adderley attributed the company’s success to retaining the values of a small business, which include strict cost controls, very tight recruitment procedures and a relentless focus on its core customers.
Yet he admitted the business was unrecognisable to many who have worked at the company over many years: “There are people around the business who were there 15 years ago and remember a very different world, where there was no head office. There wasn’t even an office.”
He took over the business from his parents in 1996 and has expanded the handful of stores he inherited to 97, a number he expects to increase to 150 in the medium term, with about 12 new stores expected this year alone.
The company refuses to say how fast the store openings will come, but a person close to the company said that it had the cash to move “very quickly”. Analysts say it could open up to 15 new stores next year.
But it is the expansion in market share that has caught many by surprise. Matthew McEachran, an analyst at Singer Capital, said: “The home category has picked up, but nobody was expecting Dunelm’s sales to be as strong as they have been.”
To keep customers as the economy begins to pick up, Dunelm will have to create strong loyalties quickly. Recent research on customers’ aspirations by retail research firm Verdict showed that Dunelm was reasonably popular with its customers, with 82 per cent saying they were loyal to the chain. But it remains behind some upmarket competitors such as John Lewis, which boasts a 92 per cent loyalty rating.
Mr Adderley’s voracious appetite for work will be an important factor in whether the company keeps its new customers. He visits between two and three stores a week and admits work can come close to an obsession.
When asked about his surprising honesty concerning the outlook for the business, he replied: “Maybe I’m not that good at the job.” Dunelm shareholders, who have seen the stock climb 61 per cent since it listed in 2007, might beg to differ.