Homewares retailer reports 4.2% drop in sales during key Christmas trading period, resulting in 1.2% like-for-like decline in first half of 2011.
The 110-strong retailer explained that it remains cautious about the UK consumer environment in H2 and believes the VAT rise will place further pressure on revenues, as well as the recent increase in cotton prices.

The decline in Q2 offset like-for-like revenue growth of 2.1% in Q1, reflecting, said the company, "a more difficult current trading environment, particularly in the weeks immediately preceding Christmas."

However, Dunelm is continuing with its expansion plans, with eight new stores already in the pipeline. Total sales for the 26-week period ended January 1 were up 8.5% to £275.7m, driven, said the company by the opening of new superstores. The contribution from new space reached 9.7% in H1, as Dunelm opened seven stores, including the relocation of an 'under-sized' superstore in Hereford.

It also completed three major store refits, resulting in an "encouraging sales uplift" when measures against comparable non-refitted stores, said the company.

Gross margin for the period is estimated to have improved by 110 basis points compared with the same period in the previous year, with similar levels of increases being achieved in each quarter.

Dunelm Mill chief executive Will Adderley said of the results; "W have continued to develop our business successfully during the half and we are delighted to celebrate the opening of our 100th superstore at the beginning of December. The business is in good health operationally and we remain in a very string financial position. However, trading conditions have been tough in our most recent quarter, especially in our peak trading weeks in late November and early December and this has had an impact, albeit limited, on both revenues and earnings."

He added: "Looking ahead we are facing a number of external factors in our market which could affect both consumer demand and bought-in costs for a period of time. However, we are very confident that we can use our strong financial position and entrepreneurial flexibility to trade our way through this period and build an even stronger business for the long term. We will continue to expand through our strong pipeline of new stores, refits and further investments in support of our strategy."

Nick Wharton, who joined the business in December, will take over the role of chief executive on February 17, when Will Adderley becomes executive deputy chairman.