Dunelm sees profits drop amid surging cost pressures

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Homewares chain Dunelm has reported a 17% plunge in half-year profits as soaring costs took their toll.

The group reported pre-tax profits of £117.4 million for the six months to December 31, down from £140.8 million a year ago despite a 5% rise in sales.

It said the results come up against an impressive performance a year earlier, driven by a pandemic boom in demand for home products as well as the reopening of stores, but it added that cost pressures affected its results in the first half.

Dunelm saw its operating costs rise by around £8 million in the first half due to rocketing inflation, mainly as it increased staff wages amid the cost-of-living crisis.

The group stuck by its outlook for the full year, having recently said it was on track to beat City expectations, but warned over the consumer backdrop.

Dunelm said: “Whilst customers have been resilient to date, the consumer outlook remains unpredictable.”

Shoppers are expected to rein in their spending this year as they face soaring bills, with inflation remaining near 40-year highs despite fuel and energy costs easing back a little.

Nick Wilkinson, chief executive of Dunelm, said: “We are all learning to live in a new, complex and rapidly evolving economic reality.”

He added: “In this environment, agility, creativity and innovation are more important than ever and we have endeavoured to make every pound count, both for ourselves and for our customers, helping to mitigate the impact of inflation.”

The Leicestershire-based retailer upped its full-year profits outlook in January after a better-than-expected 18% rise in sales over its Christmas quarter.

It has seen strong demand for winter warmers as households look to cut back on their heating bills, with a surge in sales of rugs, thermal curtains and heated airers.

Mr Wilkinson said: “Over Christmas we saw some of this pattern with the strong sales we saw for some gifting products, such as onesies or hot water bottles.

“But you can see people move through phases and we are moving into the home entertainment phase where people think more about freshening up their interiors, and then its spring clean when there is a renewed look at functionality and storage.”

Shoppers have also been buying up products from its make and mend and haberdashery ranges as they look to “repair and upcycle” in the cost crisis, according to Dunelm.

In its latest results, Dunelm unveiled a special dividend of 40p a share despite the profit decline.

Shares in the company were up 0.3% at 1,172p on Wednesday morning.