Dunelm profit to top forecasts

13th Jul 2010 07:36

Home furnishings retailer Dunelm should beat full-year profit forecasts despite a drop in like for like (LFL) during the fourth quarter.LFL sales grew 8% in the year to 3 July following a marked slowdown during the last six months to just 0.8% from 15.4% during the first half. They actually fell 1.9% in the final 13 weeks, reflecting strong comparatives with the previous year.Dunelm blames part of this imbalance on the shift in its accounting calendar so that more of the winter sale fell in the first half than before. Adjusting for this would have cut first half LFL sales by 2% and added 2% to the second.Total sales rose 18.2% to £492.8m, with an improvement of 10.9% in the second half far less than the 26% reported in first. Fourth quarter sales dropped to £111.6m from £127.1m in the previous three months.Despite this, the sales and gross margin performance will lead to operating profit for the year "a little ahead" of current market expectations, it said.The company, which has 104 stores, including 94 out-of-town superstores, did remarkably well during the recession with its 'simply value for money' offering. The share price jumped from just over £1 in June 2008 to more than £4 by last November.But the Lib-Con coalition is going to make things tough in the year ahead."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." Final results are due on 16 September.