Dunelm rewards shareholders as profits rise despite Red Sea disruption

Dunelm has revealed a £71million special dividend package after profits jumped in the first half of its financial year, despite operating in ‘more challenging’ trading conditions.

The group posted a 4.8 per cent increase in pre-tax profit to £123million for the six months to 30 December, while total sales rose 4.5 per cent to £872.5million.

The British home furnishing retailer was able to grow its profit margin despite flagging higher shipping costs related to disruption to Red Sea routes.  

In charge: Dunelm’s chief executive Nick Wilkinson

Dunelm’s performance was also up against a sharp slowdown in sales growth to 1 per cent in the final three months of 2023 compared with a year earlier, when sales surged by 17.6 per cent.

Dunelm said it was ‘managing the impact of ships taking longer, more costly routes as they avoid the Red Sea area’. 

It did provide further deal on higher costs in this regard. 

Attacks on ships by Houthi militants in Yemen have disrupted global commerce with shipping giants re-routing vessels around the southern tip of Africa, a longer and more expensive journey. 

Dunelm’s net cash stash slipped by £12million to ££6.2million during the period and diluted earnings per share edged down 2.6 per cent to 44.6p per share.

Dunelm shares were down 2.21 per cent or 24.00p to 1,061.00p on Wednesday, having fallen over 9 per cent in the last year. 

The retailer said ‘customers have been resilient but the consumer outlook remains uncertain.’

It said recent improvements in profit margins will slow during its second half as it flagged higher shipping costs and a drag from currency movements. 

Fresh: Dunelm sells a wide range of products for homes and gardens 

An interim dividend of 16p per share, up from 15p a share at the same point a year ago, will be paid to eligible shareholders on 9 April. 

The board also announced a £71million special dividend of 35p per share. The special dividend will also be paid on 9 April to shareholders on the register at the close of business on 14 March. 

The group, which employs over 11,000 staff, said it was on track for full-year profit expectations of £202million in 2023-24.

Nick Wilkinson, Dunelm’s chief executive, said: ‘In the past six months we have kept our customers front of mind, ensuring our broad offer has value at its core whilst also expanding our ranges, introducing new styles, and improving the experience across our store and digital channels.’

He added: ‘This has been particularly important in a more difficult trading environment and has resulted in another strong sales performance combined with market share gains. 

‘Despite ongoing pressures on consumers, we are encouraged by the wide variety of new customers shopping with Dunelm, and existing shoppers also coming back more frequently.’

Adam Vetesse, an analyst at eToro, said: ‘There are some challenges we expect retailers to face such as inflationary pressure on margins and higher input costs, both of which Dunelm are familiar with. 

‘Less likely would be containers of duvets being rerouted due to geopolitical tension, but that’s exactly what Dunelm is contending with due to attacks in the Red Sea.

 ‘Going the long way round costs more money and takes more time which at a point where consumers thought they might get a few quid back in their pockets due to inflation easing, will be a bitter pill to swallow.’

He added: ‘Nonetheless, pre-tax profit is up and demand is noted as resilient, so if Dunelm can keep these operational costs down as best as possible then this performance can continue throughout the year. On the other hand, if we see stubborn inflation delay rate hikes and operational hazards continue to be a sticky point, then shareholders will feel some of this pain.’