Dunelm has difficult Christmas

11th Jan 2011 07:03

Bedding and home furnishings retailer Dunelm had a tough time during the run up to Christmas, damaging sales and profits, while rising costs and consumer demand remain a concern.Like for like sales for the 26 weeks to 1 January slipped 1.2% as a 4.2% tumble in the second quarter cancelled growth of 2.1% in the first three months of the financial year.Total sales rose 8.5% to £275.7m thanks to a contribution from new space of 9.7%. Dunelm opened seven new superstores during the six months, taking the total to 100. It wants to double that medium term."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," explained chief executive Will Adderley who hands over to Nick Wharton next month. The company is also cautious about the UK consumer environment short term, and in its expectations for second half trading. "While the impact of general economic factors on consumer demand is uncertain, the increase in VAT will place further pressure on ex-VAT revenues and the recent rise in cotton prices is expected to feed through to increased cost of goods by the middle of the calendar year," it said. Ongoing development of the business is also likely to result in further non-store cost increases.The sales performance was worse than analysts at finnCap expected, prompting a downgrade to 'hold' from 'buy' with target price of 500p. But Peel Hunt keeps its 'buy' stance, having predicted flat LFL sales before any impact from snow, which is thought to have been about 2-3% of sales in the second quarter.Interim results are out on 17 February.