Nick Wilkinson, the chief executive of Dunelm, sounds relaxed as he talks about the latest plans for the business.
And he should be considering the out-of-town homewares retailer has had a record 2022 so far – and he sees no reason why long-term growth shouldn’t continue through Christmas and beyond.
As other retailers tighten their belts – Joules shares fell this week after talks of investment from Next came to nothing, while Asos warned about weak August sales with inflation weighing on shoppers’ minds – Dunelm said sales are up more than 40 per cent on pre-Covid 2019, at more than £1.5 billion.
Pre-tax profits, annual results to July 2 show, are up a third year-on-year at £209 million and margins are healthy as the business takes an increasing share of the UK homewares sector.
Speaking to BusinessLive, Mr Wilkinson said that success was partly down to dedicated staff, partly down to the simplicity of Dunelm’s business model and partly down to its position at the more value-orientated end of the market.
He said: “We’re able to adapt quickly and give our customers outstanding value, which is particularly important at the moment. As long as we carry on doing that we will carry on performing well.
“Our share of the homewares market is about 10 per cent and our market share of furniture is 1.9 per cent. We’re big, but there’s lots of headroom, we are still rolling out stores and reaching more and more customers.
“Many people know us for buying their pillows or their curtains, so are yet to consider us for lighting or for cooking and dining – which are categories where we have a lower market share.”
Right now the Leicestershire-based business has 177 stores, having opened three new ones in the past year in Wellingborough, Leeds and Basildon – which have helped contribute to 800 new jobs to the 11,000 workforce. There are also new fulfilment centres in Daventry and Stoke and the CEO expects to open between three and five a year as he builds the estate to around 200 shops.
“Several hundred” more new jobs will be created in the coming year, he said, while the business gave staff an average 7 per cent pay increase in April to deal with the rising cost of living. Workers on the lowest wages, he said, got proportionally more than others.
The business, he said, had been managing inflationary pressures for some years now: “We’ve seen waves of inflation – there was a big one 12 months ago when raw materials and freight rates increased significantly.
“But energy costs are very low for us – it’s a very, very small percentage of our operating costs. We are a low energy business. We have relatively few stores and they are very efficient – we have been investing in LED lighting for 10 years. We’re removing gas boilers and replacing them with electric boilers where we buy renewable energy.
“It’s less than 2 per cent of our operating costs.”
The announcement last week that Government would be helping households with their energy bill would, he hoped, do something to mitigate falling consumer confidence.
“People like certainty so knowing if you’re going to get support or not is quite stressful. Now people know there is going to be support – details to be confirmed – I think people will find ways to make ends meet and adapt.
“Houses will be colder though – we’re selling more 15 tog duvets – and I think people will shop in a savvy way across our range.
“We are a value retailer with a £13 average item value, but we offer value in the good, better and best quality tiers so if you want to trade down you can with us. But equally we are seeing customers who want to buy into our higher quality tiers where, for example, a product will have a longer warranty, and might last longer.
“We are also seeing people buy early for events like Christmas, which is another way of budgeting and making sure you’re spreading the cost.
“The sales horizon is murkier than I’ve ever known it in my career so you just have to keep looking, listening and adapting what you do and stay relevant.
“I imagine that for many households the idea that we have the perfect Christmas and spend a fortune on everything is unlikely. People will be finding ways of having some festive fun on a budget, and that might be when it comes to table decorations or presents and gifts, or they might be buying things that you could call essentials and wrap them up as presents, like blankets and fleeces and hot water bottles, which we cater for.
“So customers will adapt and we’ll serve them and be relevant.
“We are on a long-term growth trajectory. We are fully expecting that, in a market that might be a little bit subdued, we will carry on gaining market share and doing well.”
