LONDON, July 13 (Reuters) – British homewares retailer Dunelm (DNLM.L) forecast a tougher outlook for both sales and profit margins on Tuesday, even as it said profits for the year ended July 3 would be a little ahead of analysts’ expectations.
The group, which sells products such as curtains, bedding, blinds, rugs and lighting from mostly out-of-town stores, said sales at stores open at least a year rose 0.8 percent in the second half of its financial year, down sharply from a 15.4 percent increase in the first half.
The gross profit margin over the full year rose 190 basis points to 46.8 percent, ensuring that annual operating profit would be “a little ahead of current market expectations.”
But Dunelm also warned of tougher times ahead, as Britain takes steps to reduce record government borrowing.
“We do not anticipate that it will be possible to maintain last year’s rate of like-for-like sales growth in the coming twelve months as consumer spending has to absorb tax increases, public sector cuts and, potentially, interest rate rises,” Chief Executive Will Adderley said.
“We also think it will be hard to achieve further gross margin gains, with uncertainty over sterling and recent increases in freight costs affecting imported products.”
Dunelm shares have performed broadly in line with the UK general retail index .FTASX5370 this year. They closed at 358 pence on Monday, valuing the business at about 709 million pounds ($1.1 billion). (Reporting by Mark Potter; Editing by Louise Heavens)