Shares hit as strong Dunelm sales fail to provide boost to profits

HOMEWARES RETAILER Dunelm has seen shares come under pressure as surging sales failed to provide a boost to halfyear profits.

The chain posted an 8 per cent fall in underlying pre-tax profits to £60m for the six months to December 30 after hefty discounting and lower margin sales from its recently acquired Worldstores business offset soaring trade.

Bottom-line profits were largely flat, up 0.7 per cent higher at £56.3m.

Shares tumbled as much as 15 per cent at one stage before settling around 9 per cent lower on fears over its margin squeeze.

It comes in spite of Dunelm’s results showing a 3.5 per cent jump in like-for-like store sales and 36.8 per cent hike in comparable online sales.

Total sales rose 18.4 per cent, boosted by the Worldpay business. Dunelm insisted its profit margins would be “more stable” in the second half, but this was not enough to allay investors’ concerns.

Its recent impressive sales rise has come at the expense of profits, flattered by the addition of Worldpay trade and moves to launch more end-of-season sales as part of a drive for more “newness” in its ranges.

Dunelm chairman Andy Harrison sought to give assurance over the full-year result, but admitted “there is still more work to do to convert our good top-line growth into better bottom-line profit growth”. He added: “For the second half, we expect a more stable gross margin performance, similar to that of the first half, which, combined with increasing integration benefits from Worldstores, should help us to deliver good profit growth for the full year.”