Shares in Dunelm (DNLM) dropped after the UK homewares leader warned FY26 profits are expected to be towards the lower end of consensus estimates.
The cushions-to-curtains seller pinned the blame on a recent period of ‘broad-based softening’ in demand.
And with war in the Middle East creating a ‘more uncertain external environment’, the ‘Home of Homes’ doesn’t see consumer confidence improving any time soon.
Sales soften
Total sales for the third quarter ended 28 March increased 2.1% year-on-year to £472 million with the proportion of digital sales ticking up to 43%.
Q3 started well, following a good Winter Sale and a positive response to Dunelm’s new Spring ranges, but sales began to soften, particularly in March.
Gross margins expanded by 30 basis points thanks to favourable FX, but Dunelm also saw customers seeking value, buying into more discounted products.
Combined with weakening sales, this means FY26 pre-tax profits should come in towards the lower end of the £210 million to £217 million consensus range. Reassuringly, Middle East instability is expected to only have a small direct cost impact in FY26.
Front of mind
CEO Clo Moriarty said: ‘Although the external environment is not helpful in the short term, we continue to focus on the areas within our control – strengthening our proposition while operating efficiently and effectively.’
Moriarty also highlighted a ‘much stronger’ store opening pipeline and encouraging early results from the retailer’s recently launched app.
‘Our final quarter provides multiple opportunities for Dunelm to stay front of mind for customers, including our popular Summer Sale,’ said Moriarty. ‘We remain confident that our comprehensive offer will continue to resonate with homelovers.’
Dunelm’s shares are down 30% year-to-date and 45% in the red on a five-year view, but we don’t see any rush for bargain hunters to pile into the stock.
Competition in homewares is fierce and Dunelm has now downgraded profit guidance twice in 2026-to-date.
With the company warning of a ‘broad-based softening’ in demand, we suspect there could be further downward earnings revisions to come. Avoid for now.
Read the press release here: https://corporate.dunelm.com/investors/regulatory-news/
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