Dunelm shares fell around 12.6% as the homeware retailer warned that trading in the first six weeks of FY2027 had been “significantly softer” following a period of "unusually hot weather".

Despite a challenging consumer environment, the UK's leading homewares retailer delivered higher sales, maintained profits, improved cash generation and unveiled a new growth strategy under CEO Clo Moriarty.

The Leicestershire-based firm unveiled its new three-year 'Winning Hearts & Homes' strategy, targeting around £100m of unproductive costs to be removed by FY2029. Rather than simply boosting profits, the savings will be reinvested in store expansion, digital capabilities, technology, supply chain improvements and product innovation.

The strategy includes opening up to 10 new stores a year, with around 100 potential locations identified, while more than 50 existing stores will be refurbished by FY2028. Digital sales increased to 42% of total revenue from 40%, supported by a new app and AI-powered “Ask Dunelm” shopping assistant. App users are currently spending around 40% more per transaction than non-app users.

Dunelm reported a solid FY2026 performance, with sales rising 3.1% to £1.83bn while profit before tax was unchanged at £211m. Gross margin improved to 52.5%, free cash flow increased to £154.8m and market share reached 7.9% of the UK homewares market.

Leicestershire-based firm said trading had improved as temperatures cooled, with online conversion remaining strong and store footfall increasing.

Around 8% of salaried roles in support and distribution functions have already been cut since the end of FY2025, generating about £40m of annualised savings. Dunelm expects to incur £30m-£40m in one-off restructuring costs as part of the programme.

"We delivered a solid performance for the year, growing sales, maintaining profits and generating strong cash returns for shareholders," said Moriarty.

"Over the last year, we have taken a deep and honest look at our business and the opportunities ahead to better serve our customers and drive the Group's performance. This work has given us confidence that the opportunity in front of Dunelm is larger than we previously understood, but also that we need to evolve. The strength of our business and balance sheet means we are well placed to invest for the future and accelerate our growth trajectory."

Dunelm also plans to simplify its product ranges, with some categories potentially seeing up to 40% of SKUs removed where management believes this can be achieved with limited impact on sales. The aim is to reduce inventory costs, improve availability and increase productivity.

In the medium term, the FTSE 250 company is targeting a return to mid-to-high single-digit sales growth while maintaining an adjusted profit before tax margin of around 11%. The special dividend was reduced to 25 pence per share from 35 pence.

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