Dunelm sees profits drop amid surging cost pressures

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 impacted its results in the first half.

Dunelm saw its operating costs rise by around £8m in the first half due to rocketing inflation, mainly as it hiked 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 cautioned 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 per cent hike 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.

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.

Keith Bowman, Investment Analyst at interactive investor said: “Dunelm has detailed reassuring if broadly inline half-year results.

"As flagged at its recent Q2 trading update, sales rose 5 per cent year-over-year to £835m, helped by demand for items such as thermal curtains as consumers looked to save on energy bills.

“Market share gains in both homewares and furniture offer positives, while the fall in pre-tax profit year-over-year matched management forecasts and came given sale timings, strong post-pandemic demand in the prior year, and inflationary impacts.”