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Dunelm plumps profit expectations as new website delivers higher margins

Gross margins have been stronger than expected due to sourcing gains and better sell through, said Dunelm as it boosted profit guidance for the fifth time this year

Dunelm Group plc -

Dunelm Group plc's (LON:DNLM) shares jumped after the furniture group plumped its full-year profit expectations for the fifth time this year, as its new website went live ahead of peak Christmas trading.

The FTSE 250 homewares chain said it saw no adverse impact on sales during the critical transition period and that customers have “responded well” after the website was moved onto a more flexible, cloud-based digital platform.

READ: UBS upgrades Dunelm to ‘buy’ on the back of future online growth

“In light of the above, the board now anticipates that the full year profit before tax will be higher than our previous expectations, assuming no significant change in consumer demand as a result of the outcome of the general election,” said Dunelm.

Gross margins have been stronger than expected as a result of sourcing gains and better “sell through”, said Dunelm, with operational costs staying “well controlled” in line with expectations.

The home furnishings company’s online sales were already on the rise before the new website, increasing 35% to £35.7mln in the six months to the end of September.

Russ Mould, investment director at AJ Bell, said Dunelm's margin improvement “has to be commended” given how the general direction for retailers is “margin compression in a world of heavy discounting”.

As it moves into peak Christmas trading, profits could sweeten even more.

“Last year Dunelm had a very strong festive period with 9% like-for-like sales growth in the 13 weeks to 29 December.," said Mould. 

"The management team has historically been very cautious with regards to predicting earnings which helps to keep expectations from getting too high."

Shares took off in early trading on Thursday, soaring 18% to 977.8p.

Quick facts: Dunelm Group plc

Price: 1295 GBX

LSE:DNLM
Market: LSE
Market Cap: £2.63 billion
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