ii view: Dunelm growing faster and bets profit will hit target

Third-quarter trading update to 29 March

• Revenue up 6.3% to £462 million

Guidance:

• Continues to expect full-year pre-tax profit of between £204 million and £214 million compared with last year’s £205 million

Chief executive Nick Wilkinson said: 

"We've had a good third quarter, with strong growth and further strategic progress. The Dunelm brand continues to attract a broad range of customers, offering outstanding value and quality, and we're really pleased with how our new ranges are being received.

"Our customers are now enjoying getting their homes and gardens ready for summer and we're focused on being as relevant as possible for the warmer months ahead. We remain very mindful of the wider backdrop and the impact of increased uncertainty on consumer sentiment, but maintain our focus on strengthening Dunelm's position as The Home of Homes."

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ii round-up:

Dunelm Group (LSE:DNLM) today detailed an acceleration in sales growth, with the homewares retailer reiterating its expectation for potential growth in full-year profits. 

Sales for the third quarter to 29 March rose 6.3% to £462 million, up from a gain of 2.4% in the first half, driven by broad-based growth for homewares and furniture. Pre-tax profit for the full year to late June is still expected to match City estimates of between £204 million and £214 million - potentially up from last year’s £205 million.

Shares in the FTSE 250 company rose 5% in UK trading having come into this latest news down 11% year-to-date. That’s in contrast to gains of 26% and 7% for rivals Next (LSE:NXT) and Kingfisher (LSE:KGF). The FTSE 250 index is down 7% in 2025. 

Dunelm sells items ranging from curtains and bedding to furniture and paints. Digital sales climbed 4% during the quarter to 41% of overall sales, aided by AI assisted search and product recommendations. 

The group opened its 200th store during the period, with management continuing to seek out new opening opportunities. 

Dunelm gave no update on its search for a new chief executive following Nick Wilkinson's decision to retire once a replacement has been found. 

A fourth-quarter trading update is scheduled for 17 July. 

ii view:

Dunelm came to the UK stock market in 2006. Today it sells around 85,000 products and services, employing around 12,000 people. Just over 155 Dunelm stores operate a Pausa coffee shop. Group ambitions include increasing its market share from 7.8% in the first half of this financial year to 10% over the medium term. 

For investors, the tough consumer environment including a potential global trade war and uncertainty regarding interest rates, cannot be forgotten. Staff costs have risen under increased UK employer taxes. The pending change of the chief executive offers some uncertainty given his robust track record, while a forecast price/earnings (PE) ratio in line with the three-year average may suggest the shares are not obviously cheap. 

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On the upside, customer demand has proved robust, with the profit margin up 0.3 percentage points during this latest quarter. Both store numbers and digital sales are growing. A focus on expanding market share persists, while a new chief executive could look to inject new vigour into the retailer’s strategy.

For now, and given a forecast dividend yield of over 4.5% and consensus analyst fair value estimate above £12 per share, fans of this home related retailer are likely to sit tight. 

Positives: 

• Growing sales
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Heighten costs

The average rating of stock market analysts:

Buy