Homeware retailer Dunelm (DNLM) is set to report pre-tax profit of £116m when it publishes its full-year results to 28 June next week - 7 per cent higher than last year. Like-for-like sales growth will be about 2 per cent, with total revenues 8 per cent higher at £730m. A pre-close trading update also revealed that the gross margin expanded by 50 basis points in the fourth quarter, despite tough comparatives. That will leave the full-year margin 80 basis points higher, as Dunelm continues to benefit from more direct sourcing.
The other snippet of good news is that like-for-like sales growth improved over the course of the year: from a 0.9 per cent decline in the first half to a 5.3 per cent increase in the second. This suggests Dunelm's national TV advertising campaign, in which it invested £3m last year, is broadening brand awareness.
Overall, the retailer invested more than £5m last year in both advertising and IT to drive sales growth. That explains why the full-year profit figure came in slightly below some analysts' expectations. Given that this investment will continue into 2015, John Stevenson of broker Peel Hunt, has trimmed his full-year forecast for the current financial year by £2m to £125m.
