Dunelm puts fears of retail apocalypse to bed (for now)

The value driven furniture and homeware seller smashed the City's and its own forecasts, bringing forward its trading statement in what amounted to a reverse profit warning

Dunelm has emerged as one of the big winners over the festive season (Rodhullandemu)

The retail apocalypse is on hold - at least for now - courtesy of furniture and homeware retailer Dunelm.

Next provided some reassurance last week by performing up to fairly modest expectations, which in the current climate counts as a win, even though the performance at its bricks and mortar stores was less than rosy.

But this morning Dunelm sprang a big surprise: the company brought forward its trading statement to say it had exceeded the City’s forecasts with like-like revenues up by a mightily impressive 9 per cent.

The biggest action was at the firm’s rapidly improving online operation (sales up 37.9 per cent), but the stores did well too. Those open at least a year recorded more than respectable sales growth of 5.7 per cent. With improving margins, profits will be better than expected so you can call the announcement a reverse profit warning. Who’d have imagined we’d see one of them from a retailer? Santa, it seems, called early and often at the chain in the run up to the big day, sprinkling fairy dust as he went.

Or maybe there was something else at work.

Dunelm is a dicsounter, which at a time of profound economic uncertainty whipped up by perhaps the worst government in living memory, is worthy of note.

It’s the place to go if you need a new duvet cover, or a set of towels but don’t want to pay the earth. The average basket size is just £40, which is low for this type of retailer.

However, it's also benefited from what broker Cazenove described as “self help”. Far from needing fairy dust, while others have been bemoaning their plight, Dunelm’s bosses have rolled their sleeves up.

They were caused a few problems when they bought the Worldstores internet business out of administration. But that operation has since been closed, with the tech integrated. The latter is now paying dividends and the trend looks set to continue. Perhaps surprisingly, Dunelm currently lacks a ‘click and collect’ facility. The omission will be corrected later this year, which will further enhance the company’s offering. Both the bricks and the clicks sides of the business will benefit.

Dunelm is a rare retailer that looks set fair for growth and the ten per cent jump in the share price looks entirely justified. Why not more? Well, there is a fly in Dunelm’s ointment. It is the government I referred to, and the extremist tail on its backbenches that has been wagging the dog ever since the EU referendum.

“We remain cautious on the outlook for the second half given the ongoing uncertainty in the UK economy,” said chief executive Nick Wilkinson diplomatically.

It’ll take more than self help to weather the storm those extremists want to deliver up to their country and he appears to know that. He really needs the more sensible MPs in the House Commons to, well, took back control.

So do the rest of us.