Homeware retailer Dunelm's slower Q3 sales growth drags shares

FILE PHOTO: A view shows a Dunelm store in St Albans

(Reuters) -Britain's Dunelm Group on Thursday reported slower sales growth in the third quarter compared to the half-year as customer spending remained under pressure, although it expects gross margin to expand this year as it manages costs related to disruptions in the Red Sea.


Companies like Dunelm have been keeping prices down and providing offers to attract buyers grappling with a cost of living crisis, as inflation remains high in the UK.

The company, which has products ranging from cushions and bedding to kitchen equipment, earlier this year warned that gross margins were expected to grow at a slower pace in the second half of the year, as shipping disruptions in the Red Sea led to delays and higher transport costs.


Dunelm expects gross margin for the full year to expand by about 110 basis points from a year ago and reiterated that results for the year are expected to be in line with market forecast.

Analysts, on average, forecast full-year profit before tax to be about 202 million pounds, according to a company-compiled consensus.

Its total sales in the three months ended on March 30, rose about 3% to 435 million pounds ($542.49 million) helped by volume growth. It reported a 4.5% increase in sales in the half year.


"While there are signs that the outlook for UK consumers may be easing in some areas, it remains difficult to predict when this might translate into better conditions in our markets," Dunelm said in a statement.


Shares in the retailer fell more than 5% in early trade to 1,018 pence.

"In keeping with previous comments on trading patterns, Dunelm has found continued volatility in consumer activity, although March was a particularly challenging month," analysts at Peel Hunt said in a note.


Dunelm will issue its fourth-quarter trading update on July 18.

($1 = 0.8019 pounds)

(Reporting by Radhika Anilkumar in Bengaluru; Editing by Janane Venkatraman and Eileen Soreng)