Dunelm shares experienced an 11 percent decline on Tuesday afternoon following a disclosure that the company saw "significantly softer trading" in the initial six weeks of its financial year, which commenced on June 28. The homewares retailer attributed this downturn to heatwaves deterring consumers from shopping.
Chief executive Clo Moriarty acknowledged "undoubtedly unmet demand" for essential heatwave products such as air-conditioning units and fans, noting that these items "could have sold multiple times over." The company also intends to reassess its offerings of garden furniture and lightweight bedding in light of increasingly warm summers in Britain.
"Our product mix is for the home but not geared towards hot weather living or large proportions of garden furniture," Moriarty stated. She explained that footfall decreased during periods of extreme heat as customers chose to engage in "other things to do than spend time mooching and getting inspiration in our shops" or opted to remain indoors.
Moriarty, who joined Dunelm from Sainsbury's last October, has initiated a review of the business. Her strategy includes simplifying processes across the company and leveraging artificial intelligence (AI) and other technologies to enhance stock availability, with a goal to cut costs by £100 million over three years. This cost-saving initiative has already resulted in approximately 95 job losses to date, affecting various departments, including distribution.
Dunelm's expansion plans involve opening up to ten new stores annually over the next three years, targeting new locations in London, the South East of England, and Northern Ireland. In the previous financial year ending June 27, the company reported a 3.1 percent increase in sales to £1.83 billion, with profits remaining flat at £211 million.
The retailer also cited weak consumer confidence in the past financial year, influenced by "geopolitical uncertainty, elevated interest rates and inflation, and a changing UK political landscape," which collectively dampened spending power. Customers are reportedly "shopping more selectively and increasingly seeking value through promotions, particularly in discretionary categories such as homewares."
Echoing concerns from other British businesses like Sainsbury’s and Debenhams, Dunelm has called on the UK Government to address a customs duty loophole that provides an advantage to overseas online retailers. Moriarty emphasized the need for a "fair and level playing field" between retailers.
Separately, Dunelm sees an opportunity in supporting graduates who are remaining at home due to a challenging job market, noting demand from young people looking to "make their childhood homes more adult friendly" in a "post-uni refresh."