Curtain call for Dunelm

While revenue growth of 13.4 per cent was largely driven by 10 store openings in the half year, like-for-like sales grew 2.2 per cent, reflecting gains in market share through competitive pricing and products with wide-ranging appeal. Yet, despite aggressive price-cutting, the retailer managed to increase gross margins by 30 basis points to 49.5 per cent, driven by a focus on direct sourcing, lower commodity costs and stronger buying power. New store space pushed up costs, but operating profits still rose 14.5 per cent to £59.3m, with new stores delivering robust returns on invested capital.

Dunelm has ambitious plans to boost the store base from 133 to 200 units and four new stores will open by the year-end. Sales growth will also come from investment in multi-channel, with a target to increase these sales from 4 per cent of revenue to "high single digits", according to chief executive Nick Wharton.

The subdued homewares market and tough fourth-quarter comparatives do present challenges, but Dunelm is highly cash-generative, bolstering expectations that within three years the company will make another capital return to shareholders, following the £65.8m returned in November.

Panmure Gordon expects full-year EPS of 40p, rising to 45.39p the year after.