Dunelm share price down on FTSE 250 as half year sales rise
Shares in Dunelm were down on the FTSE 250 in morning trading despite the furniture and homeware company reporting a rise in sales in the half year ended 1 January 2011.
Total sales in the period increased 8.5 per cent to £275.7 million, although on a like for like basis sales fell 1.2 per cent. The fall in like for like sales was attributed to a difficult trading environment ahead of Christmas offsetting a better performance in the first quarter.
During the half year period Dunelm opened seven new superstores, taking the total number of superstores to 100.
In an outlook statement Dunelm said it was "confident" about its prospects for long-term growth, but said it was "cautious" about the short term thanks to the recent hike in VAT and rising cotton prices.
Will Adderley, Chief Executive of Dunelm, said, "We have continued to develop our business successfully during the half and we were delighted to celebrate the opening of our 100<sup>th superstore at the beginning of December. The business is in good health operationally and we remain in a very strong financial position.
"However, trading conditions have been tough in our most recent quarter, especially in our peak trading weeks in late November and early December and this has had an impact, albeit limited, on both revenues and earnings.
"Looking ahead we are facing a number of external factors in our market which could affect both consumer demand and bought-in costs for a period of time. However, we are very confident that we can use our strong financial position and entrepreneurial flexibility to trade our way through this period and build an even stronger business for the long term. We will continue to expand through our strong pipeline of new stores, refits and further investments in support of our strategy.
Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers, commented, "Today's update has clearly prompted profit taking. Having outperformed the broader retailing sector by 20pc plus over the last 3 months, a 4.2pc decline in same store sales over virtually the same timeframe raises questions.
"The weather has undoubtedly played its part, while competition across the board remains intense. In addition, cautious management outlook comments regarding the near term add further woe, with the rise in cotton prices expected to provide cost pressures later in the year.
"In all, while Dunelm is still viewed as a retailer with growth prospects, today's update looks likely to see investors reassessing prospects. The potential to expand its store empire remains, but retailing is currently a difficult place to be, with investors quick to exit upon any signs of difficulty. As such, while market consensus opinion currently denotes a buy, some downside pressure could be seen near term."
By 10:55 shares in Dunelm were down 4.26 per cent on the FTSE 250 to 505.00 pence per share.
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