Dunelm has reported a 3% increase in sales despite the group’s CEO suggesting discretionary spending remains “under pressure”.

The homeware retailer reported that its total sales climbed 3% to £435m for the quarter ending 30 March.

Dunelm told investors that trading conditions had continued to be volatile, with March in particular seeing softer levels of demand in the homewares and furniture markets.

Against this backdrop, however, the group saw its gross margin remain strong as it increased by 60 basis points in the quarter.

Total sales across the first three quarters in Dunelm’s FY24 have now reached £1.3bn, a figure up 4% year-on-year, and the group is expecting its full-year profit before tax to be “broadly in line” with market expectations.

Dunelm’s CEO, Nick Wilkinson, said that the retailer delivered a “resilient performance in Q3”.

“Whilst discretionary spend remains under pressure, our relevant and attractive product offer continues to resonate with customers as they shop across our broad ranges to find quality and value for all areas of the home,” he added.

“This performance reflects our deep-rooted understanding of our customers and the effectiveness of a total retail system which continues to drive growth across store and digital channels, bringing further market share gains. At the same time, our operational grip continues to mitigate ongoing cost headwinds and has supported a strong gross margin performance.”

Lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, added: “Dunelm has reported that sales rose 3% in the third quarter – led by volume. While this suggests consumers are still prepared to part ways with their cash on homewares, the market remains very challenging.

“Dunelm speaks of volatile trading patterns and profits aren’t expected to be especially impressive. While Dunelm is one of the strongest names in the sector, and the most nimble, this corner of retail faces an uphill battle for now.

“Customers are prioritising their trips to the sun and putting off replacing the curtains.”

---