Dunelm expects fall in profits amid 'challenging' retail market
Dunelm is expected to report a dip in full-year profit after it flagged an "uncertain consumer environment" and recorded falling sales.
The homewares retailer said it expects pre-tax profit for the year to July 1 to come in between £109 million and £111 million, down from the £128.9 million reported last year.
Like-for-like store sales fell 2.4% in the period, with overall comparable sales down 0.5%.
The figures come after Dunelm warned in February that costs were starting to rise in the face of the Brexit-induced collapse in the value of the pound, resulting in a more "challenging" retail environment.
The group, which recently acquired Worldstores, fared better in the fourth quarter, which saw total revenue grow 17.7% to £240 million and like-for-like sales rise 3.8%.
Over the year, sales were up 8.5% to £955.6 million, boosted by Worldstores.
Boss John Browett said: "We've seen a good quarter of trade with positive like-for-like sales growth and a very strong online performance. Encouragingly, we continue to take market share.
"We continue to invest in the business for the longer term to improve our customer proposition and infrastructure and, despite an uncertain consumer environment, we go into the next financial year with some good momentum."
He added that the Worldstores acquisition will provide a "massive leap forward" to Dunelm's online and store offer.
Earlier this year the chief executive warned that customers will face further price hikes as the plummeting pound ramps up costs.
Sterling's decline has resulted in a sharp rise in import costs for British businesses, much of which will be passed on to already struggling consumers.
Shares rose over 4.5% to 624.5p in afternoon trading as investors focused on the fourth quarter momentum.
But George Salmon, equity analyst at Hargreaves Lansdown, said that the retail sector has much to be concerned about.
"While electric fans and garden equipment may have kept the tills ringing, these items are sold at a lower margin, so the higher sales won't be translating to a better bottom line.
"While it is good to see the integration of Worldstores progressing well, all things considered conditions remain tough for Dunelm just now.
"We've already had a damaging profit warning from DFS, and the fact that wage growth is now lagging inflation will surely add to concerns around the sector."