LONDON (ShareCast) - (Sharecast News) - Homeware retailer Dunelm backed its full-year profit expectations on Thursday as it reported an uptick in first-half sales despite a challenging environment.
Sales grew 2.4% to £894m in the first half. In the second quarter, sales were up 1.6% to £490m in what the retailer called a "challenging market".

Dunelm said FY25 pre-tax profit was still expected to be within the range of market expectations of between £207m and £217m, "against the market backdrop and ongoing cost challenges facing our sector".

The company said that while it is "mindful" of the impact of the Autumn Budget on it and its suppliers and customers, it expects initiatives to drive productivity to mitigate the upward pressure on costs in the medium term.

Chief executive Nick Wilkinson said: "We're pleased with our performance in the first half; we are growing sales and volume, with customers again responding well to the value and choice we offer across our ranges.

"At the same time, we've made significant strategic progress across multiple initiatives which are helping us to improve our attractive, specialist offer and continue to gain market share. We have taken our first steps outside the UK with the acquisition of 13 stores in Ireland, opened our first inner London store in Westfield, and made further improvements to our online customer experience which is contributing to continued strong digital growth.

"As we move into the second half of FY25, we have successfully launched our Winter Sale which is being well received by customers seeking amazing value across a wide choice of relevant products for the colder months. As we navigate this challenging environment, we see even more opportunities to harness our unique business model, raise the bar on our proposition and fulfil our ambitions as The Home of Homes."

At 1300 GMT, the shares were down 4.1% at 987.50p.

Russ Mould, investment director at AJ Bell, said: "Dunelm's mediocre festive trading update went down poorly with the market. Sales growth was minimal which has to be disappointing given it should have done well with people looking for good value homeware products to give as Christmas presents.

"Stronger margins and good growth with click and collect are positive factors. It's also interesting to see Dunelm test the water with new initiatives such as a store inside a busy central London shopping mall and an acquisition to open more doors in Ireland. Expanding the brand's reach is important to take the business to the next level.

"However, the fact the core business is only recording marginal gains would suggest Dunelm faces an uphill battle this year. Pressure on costs from Budget-related initiatives and a fragile consumer backdrop means the retailer will have to work extra hard to stay on track.

"The fact it has maintained full-year profit guidance comes across as slightly ambitious. There is a real risk that Dunelm's trading deteriorates in the coming months because of the market backdrop rather than any fault of its own. It might have been better to take an ultra-cautious view of the outlook than hope for the best and subsequently disappoint the market."

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