UK homeware retailer Dunelm's HY sales rise on higher volumes, strong demand

(Reuters) -Dunelm Group's shares fell sharply on Thursday after the British homewares retailer reported a lower sales increase in the second quarter compared with the first, highlighting the impact of rising costs and sluggish consumer spending on the retail sector.

The retailer's sales in the second quarter, which ended in December, rose 1.6% from a year earlier but were lower than previous quarter's increase of 3.5%. Dunelm's current financial year ends in June.

Increases in taxes on employers and the minimum wage, have put more pressure on retailers in Britain that are already facing rising operational costs that could hit consumer spending.

Dunelm said it expects to mitigate the additional cost pressures over the medium term and kept its annual profit guidance unchanged. The company did not give further details.

Shares of the FTSE 250 constituent fell to a near nine-month low of 978 pence. Dunelm was also the biggest percentage loser on the index.

"Dunelm is continuing to take market share, but there is no sign of wider consumer recovery, in line with the broader sector," Peel Hunt analysts said.

A company-compiled consensus average of analyst expectations for FY25 pre-tax profit is 213 million pounds.

Sales rose a modest 2.4% in the first-half of the year with its furniture category performing particularly well, Dunelm said.

The company, whose product ranges include armchairs and kitchen essentials, has been focusing on increasing its market share via product expansions and improving its online business.

It bought Irish soft furnishing business Home Focus at Hickeys in November 2024.

Dunelm's online sales made up for 39% of its total sales in the first half and it plans to open five new UK superstores in the second-half of 2025.

CEO Nick Wilkinson said customers were responding well to Dunelm's price-focused options across the range.

Total sales came in at 894 million pounds ($1.09 billion) for the six months ended Dec. 28, up from 872 million pounds a year ago.

($1 = 0.8191 pounds)

(Reporting by Yamini Kalia and DhanushVignesh Babu in Bengaluru; Editing by Rashmi Aich and Jane Merriman)