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Dunelm warns on fourth quarter

The homewares retailer struggled to attract customers into stores during an unseasonably warm final quarter
May 29, 2018

Most retailers are lamenting the March snowstorm known as the “Beast from the East” which has played havoc on recent trading figures. But homewares specialist Dunelm (DNLM) appears to have done the opposite. Instead of blaming the recent cold snap, it says the unusually hot and humid weather seen since mid-April has caused a material decline in store footfall during its fourth quarter. In fact, the decline has been so severe that three previous quarters of relatively better trading have effectively been wiped out, forcing the group to issue a profit warning.

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In the quarter to date, bosses say like-for-like sales are down 4.7 per cent, but up 0.1 per cent if online growth is included. Total sales are still expected to rise 10 per cent for the year, but underlying profits will fall slightly short of last year’s £109m. That’s been exacerbated by the changing shape of the group, too: the recent disposal of the Achica business has weighed on non-like-for-like sales, while the acquisition of Worldstores has yet to turn a full profit ahead of full integration next year.

Analysts at Peel Hunt agree that Dunelm is particularly vulnerable to warmer temperatures, tending to perform better when the weather turns wet. According to the brokerage, that’s because consumers are generally shopping “by need” and head out in search of barbecues and summer clothing once the sun comes out. But that hasn’t stopped its analysts from downgrading current-year forecasts, taking the adjusted pre-tax profit projection from £118m to £107m and EPS from 45.4p to 41.4p.