Homewares retailer Dunelm (DNLM) gained 4.9% to £14.06 as it posted a record quarterly performance amid bumper Christmas trading and pointed to a full year profit ‘materially ahead’ of expectations.

The outlook was supported by strong sales and margin performance in the second quarter and the first half of the year, with pre-tax profit in H1 expected to have jumped to £140 million from £84 million. The company now expects full year pre-tax profit to comfortably beat the £181 million market estimate for the 12 months to June 2022.

Sales of £407 million in the second quarter were up 13% compared to the same period a year earlier and 26% compared to the 2020 financial year.

MARGIN IMPROVEMENT

Digital sales penetration returned to a more normalised level of 33% in the second quarter, while gross margin in the second quarter increased by 160 basis points compared to the same period last year, ahead of expectations, driven by ‘higher full price sell through of seasonal ranges’, the company said.

For the first half of the financial year, gross margin increased by 80 basis points, and as a result the company now estimated that full year gross margin would be better than previously expected, at around 30-to-50 basis points lower than in the 2021 financial year.

The retail team at stockbroker Numis commented: ‘We expect consensus financial year 2023 forecasts to rise around £20 million (or 11%) to be flat year-on-year, reflecting robust growth being offset by the anniversary of this particularly profitable half and a greater headwind from freight inflation. Both continue to look conservative in our view.’

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Issue Date: 12 Jan 2022