Dunelm has reported slow growth in its profit before tax, increasing by 0.2% to £123.2m year-on-year, with analysts describing the firm as "swimming in mud".

In the 26 weeks to 28 December 2024, the homeware retailer saw its total sales increase by 2.4% to £893.7m, which it said was "driven by volume".

Dunelm added that it witnessed a "strong digital performance" in the period, with 39% of total sales generated through digital channels.

It boasted a gross margin of 52.8%, an increase of 0.1% year-on-year, "whilst maintaining" its value proposition.

Furthermore, its earnings per share increasing by 0.9% to 45 pence.

Chief executive officer at Dunelm, Nick Wilkinson, said the performance "reflects the growing attraction of the Dunelm offer for a wide range of customers", as well as the "quality and resilience" of its business model.

He added: "Amidst a challenging backdrop for retail, those attributes have helped us deliver increased sales, a strong gross margin, and both customer and market share growth. We have also pressed ahead with our strategy.

"Our thriving total retail system is connecting that product with more customers, and we saw further growth in our increasingly personalised digital channels, as well as some exciting firsts for our store portfolio; we arrived in inner London at Westfield, acquired 13 stores in Ireland, and we will open our 200th store in the second half."

Looking ahead, Dunelm said it remains "confident" in its "advantaged business model" and that it is "progressing" with its strategic plans, whilst staying "mindful of a challenging sector backdrop and a cautious consumer".

It added that it is "encouraged by early trading in the second half", and its profit expectations for the full year are unchanged and in line with consensus.

However, this optimism was not felt by some analysts, with investment director at AJ Bell, Russ Mould, stating that the firm is "swimming in mud".

He concluded: "Profit growth has ground to a halt as the retail backdrop deteriorates and consumers continue to watch every penny. Value-oriented retailers are struggling in this climate as lower-income individuals buckle under the strain of relatively high interest rates and a deteriorating jobs market.

"Dunelm appears to be doing everything it can. Margins are holding up, which implies it is avoiding widespread discounting, and it continues to take market share. It’s the best it can do under the circumstances until the backdrop improves.

"Wilkinson’s departure isn’t anything to worry about. He has helped to transform the business into one that now has a strong digital proposition and a solid store estate. If anything, he’ll be sorely missed by investors. His replacement – once appointed – will inherit a business with the right foundations to keep growing. Unlike many leadership changes in retail, Dunelm is not a turnaround story that needs someone new to steady the ship."

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