Dunelm reveals subdued Christmas trading set to hold back profit growth

Retailer Dunelm has seen shares tumble after revealing pressure on profits following a sales slowdown over the festive season.

The furniture and homewares chain reported modest sales growth of 1.6% in its second quarter for the 13 weeks ended December 27, down sharply from 6.2% growth in its first quarter.

It saw shares plunge 18% in morning trading on Thursday as it said the sales slowdown was set to see profits come in at the lower end of forecasts at between £214 million and £227 million.

Despite growth over the Christmas period matching last year’s figures, the company said weaker trading over the festive quarter had weighed on profits for the first half of the year, limiting scope for stronger growth in the second half.

Clo Moriarty, chief executive of Dunelm, said: “The performance reflected a strong first quarter followed by a more challenging close to the half.”

The company said it experienced particularly tough conditions during Black Friday and in the run-up to Christmas, which it said was a result of the “ongoing challenging macroeconomic environment”.

Ms Moriarty, previously chief retail and technology officer at Sainsburys, took up the role of chief executive at the furniture store in October.

The company blamed its weaker performance for the festive quarter on “an especially high level of competitive activity in both digital marketing and discounting”, as online retailers stepped up promotions during the key Christmas trading period.

Growth of its digital offering has been a key focus of the homeware company, as it reported 42% of its sales were made online over Christmas, up from 40% for the same period the previous year.

“Whilst the UK retail environment remains variable, we have acted on some clear lessons from the first half, including targeted steps to improve availability”, Ms Moriarty said.

Despite the weaker performance over Christmas, the company is pressing ahead with plans to open two further superstores, after opening its second London store in Wandsworth in November.