Homewares retailer Dunelm Mill is on course for a half-year profits boost after rebounding from a difficult summer.
However, a decline in like for like (LFL) sales, which strip out the effect of new store openings or closures, failed to impress investors and the firm’s stock dropped more than 3% in early trading.
In an update to the markets, parent company Dunelm Group said sales in the 26 weeks to December 28 had totalled £356.3 million, a £16.3m uplift from the same period in the previous financial year.
Total sales growth in the period was 4.8%, below the 13.4% figure from last year, but LFL sales fell back into negative territory at -0.9% compared with 2.2% growth at the same juncture in the FY2013.
The total figure represented a significant fightback by the retailer in the second quarter as the first three months of the year saw sales hit as a particularly good summer kept shoppers out of the stores, leading to a 5.3% LFL reduction in the period.
The company said the 2.9% LFL increase in Q2 resulted from the launch of its autumn catalogue, a first ever TV advertising campaign and the opening of a new delivery centre which helped to boost the company’s online sales capacity.
Dunelm said gross margin for the half year improved by 100 basis points as a result of benefits from its direct sourcing programme.
Chief executive Nick Wharton said the firm had traded robustly in the period and was on track to deliver pre-tax profits of £61.5m, up from £59.3m achieved 12 months earlier.
The company has 131 superstores including outlets in Dundee, Perth, Kirkcaldy and Falkirk and has medium-term plans to expand its portfolio to 200.
Mr Wharton said the board were confident in the retailer’s growth prospects.
He said: “Our home delivery proposition has become much stronger as a result of our new fulfilment centre and we are beginning to see the benefits from our increased advertising investment to drive brand awareness.
“These investments have been funded through continued gross margin expansion and with continuing profitable growth from new stores, the board anticipates that profit before tax for the first half of the year will be approximately £61.5m.”