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Dunelm to take £3mln hit as it struggles to get rid of clearance items in summer sale

The homeware retailer uses the summer sale to clear its leftover stock before the start of its new financial year, but “disappointing footfall” meant it wasn’t able to do that this year
dunelm store
Store sales returned to growth last year, but that won't translate to the bottom line

Dunelm Group PLC (LON:DNLM) is having to take a £3mln hit as it struggled to get rid of its discontinued lines during the summer sale.

The homeware retailer usually clears out its soon-to-be out of season products during the sale but “disappointing footfall” meant it wasn’t able to sell as much as it had hoped.

READ: Dunelm downgraded by JP Morgan Cazenove

As a result, it has had to chop the prices of some of those sale items even further, meaning it will bring in £3mln less from the clearance merchandise than it had originally anticipated.

The reduced prices will weigh on the group’s gross margin for the year ended June 30, which is expected to have fallen 90 basis points to 48.0%.

Like many of its bricks-and-mortar peers, Dunelm has been growing its online business as it reacts to changing consumer habits.

Like-for-like sales from its website surged by almost a third over the past year to £105.4mln, while the stores also returned to growth with LFL sales climbing 8.2% to £805mln.

Including new stores and the addition of Worldstores.co.uk and Kiddicare.com – purchased at the end of 2016 – total group sales jumped 9.9% to £1.05bn.

Profits set to fall

The rise is revenues won’t offset the drop-off in margins though, with full-year profit before tax forecast to fall to £102.0mln (2017: £109.3mln). Net debt is expected to be broadly similar to last year at £122mln.

“I am delighted to have joined Dunelm as it gathers pace on the journey to becoming a truly multi-channel business,” said chief executive Nick Wilkinson, who took up his role earlier this year.

“I firmly believe that our homewares authority, combined with our increasing ability to adapt to evolving consumer trends, means that there is very significant potential for growth of the Dunelm brand.”

He added: “We have expanded our customer reach and digital capabilities significantly over the last twelve months and will continue to do so as we exploit the technology assets which we acquired with Worldstores.”

Dunelm shares fell 2% to 161.1p in early deals.

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