Dunelm joins today's retail revival

By This Is Money
Updated: 08:23 EDT, 14 April 2011

Retail chain Dunelm reported a 'pleasing' jump in sales after it increased its share of the homewares market and opened new stores.

Sales rose 9.4% to £139m in the 13 weeks to April 2, while margins also improved after the group had more success in passing on cost hikes.

Dunelm said its sales outstripped the growth in the homewares market, citing figures from the British Retail Consortium, after being boosted by a January sale in which it sold nearly all its discontinued stock.

However, it warned it is unlikely to maintain the growth in margins as it expects more price hikes from suppliers and will struggle to pass these on to customers in the 'very challenging' environment that lies ahead.

New outlets in Scarborough and Truro have opened in recent weeks, bringing its total to 111, while it plans to open 10 more stores over the coming year. The group has a medium-term target of increasing its store estate to between 150 and 200 stores across the UK.

Excluding new store openings, sales were 1.3% lower than a year earlier, similar to the 1.2% decline it reported for the half year to January 1.

Chief executive Nick Wharton, who took up the role in February, said: 'Against strong prior year comparatives and difficult trading conditions, it is pleasing to see the continued growth of our business.'

Mr Wharton, a former Halfords executive, took over from Will Adderley whose parents started the business on a market stall in Leicester in 1979. Katherine Wynne, an analyst at Investec Securities, said the group's most recent update was better than expected but she fears the group could suffer if fuel prices continue to rise, making it more expensive to drive to its 100 out-of-town stores.

She maintained her forecast that pre-tax profits will increase 8% to £83m for the year to July 31.