Dunelm shares rose 2.7% to 743p in late morning trading on Wednesday, after the firm announced a total sales rise to £1.5 billion in FY 2022 against £1.3 billion in the previous year.
Meanwhile, the group noted digital total sales of 35% from 46% year-on-year.
Dunelm reported a record pre-tax profit of £209 million compared to £157.8 million, along with a gross margin of 51.2% from 51.6%.
“Looking in the rear-view mirror Dunelm can only see sunny skies as it reports another record profit. But a glance through the windshield reveals a massive consumer cloud about to break over the business,” said AJ Bell investment director Russ Mould.
“Dunelm hasn’t faced a heavy shower yet. Sales have remained ‘robust’, albeit modestly lower year-on-year in the first 10 weeks since the year end on 2 July, and that is testament to the company’s skills as a retailer.”
“Over recent years Dunelm has been one of those names in the retail sector which has got the basics right. It has products people want to buy, at a price they want to pay, and it puts them in front of shoppers at the right times.”
The firm pointed out a homewares market share gain of 1.4% and continued share gains in furniture.
“Like other survivors in the retail space, Dunelm should benefit from market share gains as smaller and weaker rivals fall by the wayside,” said Mould.
The home furnishing retailer also confirmed an operating costs:sales ratio of 37.5% against 39.1%.
The company highlighted a net debt of £23.8 million against net cash of £128.6 million the year before.
Dunelm commented it was on track to deliver FY 2023 results in line with analyst expectations, and estimated a 50% gross margin for the FY term.
The company also said it was set to manage costs through efficiency improvements and operational grip.
“We feel confident and well prepared to weather the current economic pressures – we emerged from an unprecedented global pandemic as a bigger, better business and we believe we have the tools in place to do that again. That said, the operating and economic environment is extremely challenging,” said Dunelm CEO Nick Wilkinson.
“In this environment, we have to make every pound count, both for ourselves through our tight operational grip and cost discipline, and for our customers, through our offer of outstanding value at all price points.”
Dunelm hiked its ordinary dividend per share to 40p from 35p, and declared a special dividend per share of 37p from 65p.
“For now, the company is sticking with full-year forecasts. But even Dunelm can’t change the economic weather and it seems likely sales will eventually suffer as people wait a bit longer to replace that duvet set or pair of curtains,” said Mould.
“As the retailer desperately tries to make ‘every pound count’, to use the language of chief executive Nick Wilkinson, doing what it can to keep a lid on costs and offer customers value, there may be some confidence that it can emerge from the storm a stronger business.”
