Homewares group warns of lower first-half profits after unusually warm weather hits sales, putting pressure on a turnaround strategy built on job cuts, store expansion and tighter costs.
Dunelm has warned that first-half underlying pre-tax profits will fall year on year after an unusually warm summer disrupted sales, exposing the challenges facing the homewares retailer as it attempts to revive growth amid fragile consumer spending.
The group said total sales fell by about 3 per cent in the first six weeks of its new financial year, blaming “exceptionally warm weather” alongside difficult trading conditions and an uncertain consumer backdrop.
Trading subsequently improved. Sales rose by approximately 4 per cent in the following seven weeks to September 26, leaving total sales up 1.1 per cent over the quarter. Like-for-like sales, which exclude the effect of changes to the store estate, nevertheless declined by 0.8 per cent.
The recovery offers Dunelm some encouragement ahead of its crucial peak trading period, when demand for home furnishings and seasonal products can help determine the retailer’s annual performance. But the warning over first-half profits underlines the pressure on a business whose fortunes remain exposed to changes in consumer behaviour and the wider economic environment.
Chief executive Clo Moriarty said she was “encouraged by the momentum we built as the quarter progressed” after the weather-related setback.
She said the company was taking steps to strengthen its customer proposition and build the capabilities needed to support longer-term growth. Dunelm maintained its full-year guidance, signalling confidence that its recovery plans and second-half trading could offset the weaker start.
That optimism comes alongside a sweeping three-year overhaul designed to strip approximately £100 million of costs from the business by the 2029 financial year.
The programme follows a reduction of about 8 per cent in central roles, equivalent to around 95 jobs across support functions and distribution. Dunelm said the changes were intended to simplify operations and reduce overheads.
The savings are intended not simply to bolster the bottom line, but to release funds for investment. Plans include simplifying product ranges, refurbishing existing shops, improving the use of data and analytics, and creating a dedicated change team.
The retailer is also targeting around 100 potential locations for new stores, with plans to open as many as 10 annually over the next three years.
The strategy presents a difficult balancing act: cutting costs and removing layers of administration while continuing to invest in stores, technology and customer experience.
For now, Dunelm’s unchanged full-year outlook offers a measure of reassurance. But with first-half profits expected to decline and like-for-like sales still negative, the retailer must demonstrate that the improvement in trading can endure beyond a temporary rebound from the summer weather.
The coming peak season will be a critical test of whether its restructuring can deliver sustainable growth — or whether pressure on household spending will continue to weigh on performance.
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