Shares in Dunelm Group have fallen by almost a fifth today after the UK homewares retailer warned full-year profits are now expected to come in at the lower end of market expectations.
The update – and subsequent 17.6% share price dip – comes despite posting a solid first-half performance.
The retail giant鈥檚 total sales rose 3.6% to 拢926 million in the first half of its financial year, helped by continued growth in its core categories and stronger digital participation, with online-related sales accounting for 41% of total revenue.聽
However, the group said trading became 鈥渕ore challenging鈥� in the second quarter, with Q2 sales up just 1.6% to 拢498m, following stronger momentum in Q1.
Dunelm said the tougher performance was particularly evident around Black Friday and into December, as competition intensified across the market.聽
It added that it stayed 鈥渄isciplined鈥� in promotions during the period but faced 鈥渁n especially high level of competitive activity鈥� in both digital marketing and discounting, which weighed on sales.
Despite the slower sales growth in Q2, the company鈥檚 gross margin remained strong, rising 60 basis points year-on-year in the first half, primarily driven by FX tailwinds.聽
It now expects first-half profit before tax of approximately 拢112m to 拢114m.
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The business continued to invest in its customer proposition, including opening its second inner London store in Wandsworth, reopening its Yeovil store following a fire, and progressing plans to open up to two more superstores in the second half.
A new Dunelm mobile app is now live on Apple and Android, with a full customer launch planned for February.
鈥淲e delivered a solid first half, and I’m really proud of all our colleagues for their efforts over this busy period,鈥� said CEO Clo Moriarty.
鈥淭he performance reflected a strong first quarter followed by a more challenging close to the half.
鈥淲hilst the UK retail environment remains variable, we have acted on some clear lessons from the first half, including targeted steps to improve availability, ensuring customers can access our fantastic ranges seamlessly, however they are shopping with us.
鈥淚 see multiple opportunities to extend Dunelm’s market-leading position – there is much more in the tank.聽
鈥淎s such, we are now moving forwards with energy and discipline, actively building new plans whilst executing existing ones to ensure we are the first choice for all home lovers.鈥�
Despite optimism from the top, investors reacted negatively to the update and the firm鈥檚 share price has dropped by over 拢2 to 964p so far today (12:00pm).聽
The Leicester-based firm鈥檚 market cap is now just under the 拢2 billion mark.
Dunelm will publish its interim results on 10th February.