Price of homewares set to rise 5% at Dunelm as it suffers 26% slump in profits

Shares in the company were down 7.4% at 634 pence during morning trading
It is understood some 22,500 products at Dunelm will see price rises
In November the firm splashed out £8.5 million on acquiring rival WS Group

By Sadie Whitelocks For Thisismoney.co.uk

Published: 05:37 EST, 8 February 2017 | Updated: 05:37 EST, 8 February 2017

e-mail

View
comments

A major homewares chain has becomes the latest British retailer to warn that the prices of its products will rise sharply this year.

Homewares chain Dunelm said it will be forced to hike prices by up to 5 per cent as it reported a decline of 26 per cent in half-year pretax profitsand blamed the decline of sterling.

Following the poor trading results, shares in the company were down 7.4 per cent at 634 pence during morning trading, after hitting their lowest since January 2013 earlier in the session.

Feeling the pinch: Dunelm has reported a decline of 26 per cent in half-year pretax profits as a result of the post-Brexit fallout

Commenting on the downturn, a spokesperson from Dunelm said: 'Margin was impacted by the depreciation of sterling against the US dollar, both as a result of some cost price increases from direct to store suppliers, and hedges on directly imported products starting to unwind.

'Retail prices have been increased on a small number of products to negate the impact to margin; we expect to put through further price rises on a number of categories in the second half, allowing gross margin to remain broadly flat in the second half, compared to the same period last year.'

It is understood some 22,500 products at Dunelm out of 30,000 lines will see price rises over the course of the year due to inflation.

The pound has fallen by around 16 per cent against the US dollar compared to its pre-referendum peak, and approximately 10 per cent against the euro

The pound has fallen by around 16 per cent against the US dollar compared to its pre-referendum peak, and approximately 10 per cent against the euro.

The result has been a sharp rise in import costs for British businesses, much of which will be passed on to already struggling consumers.

The news came alongside Dunelm's first half results, which saw sales dip amid a 'challenging' retail environment.

The company also blamed unusually warm weather for reduced store footfall.

However, the depressing trend continued and the group said like-for-like sales fell 1.6 per cent in the 26 weeks to December 31, with comparable store sales declining 3.1 per cent.

As a result, pre-tax profit declined 13.6 per cent to £65.2 million, also impacted by increased investment.

Weighing in on the matter, Dunelm boss John Browett said: 'We are in a transitional year for Dunelm and it has been a particularly busy first half - whilst we are operating in a challenging retail environment, especially in homewares, we remain focused on investing in and developing our business for the future.

'Whilst trading was slightly softer than we would have liked due to a weaker market, we continue to increase our share and are confident that we will emerge as an even stronger market leader.'

Total revenue nudged up 2.8 per cent to £460.5 million, boosted by strong online growth and five new store openings in the period.

In November the firm splashed out £8.5 million on acquiring rival WS Group, which consists of Worldstores, Achica and baby retailer Kiddicare.

Dunelm said it incurred an exceptional cost of £9.3 million associated with the deal.

Holiday Money Deals of the Week