Dunelm Group H2 2026 Earnings Report

Dunelm Group EPS Results

• Actual EPS: GBX 77
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dunelm Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dunelm Group Announcement Details

• Quarter: H2 2026
• Date: 9/8/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, September 8, 2026
• Conference Call Time: 2:00AM ET

Dunelm is the UK's market leader in homewares with a purpose 'to help create the joy of truly feeling at home, now and for generations to come'. Its specialist customer proposition offers value, quality, choice and style across an extensive range of c.70,000 products, spanning multiple homewares and furniture categories and including services such as Made to Measure window treatments. The business was founded in 1979 by the Adderley family, beginning as a curtains stall on Leicester market before expanding its store footprint. The business has grown to 180 stores across the UK and has developed a successful online offer through dunelm.com which includes home delivery and Click & Collect options. 152 stores now include Pausa coffee shops, where customers can enjoy a range of hot and cold food and drinks. From its textiles heritage in areas such as bedding, curtains, cushions, quilts and pillows, Dunelm has built a comprehensive offer as ‘The Home of Homes’ including furniture, kitchenware, dining, lighting, outdoor, decoration and DIY. The business predominantly sells specialist own-brand products sourced from long-term, committed suppliers. Dunelm is headquartered in Leicester and employs over 11,000 colleagues. It has been listed on the London Stock Exchange since October 2006 (DNLM.L) and the business has returned over £1bn in distributions to shareholders in the last ten years*. * Ordinary dividends plus special dividends plus special distributions.

Dunelm Group H2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Sales grew 3.1% to £1.825 billion, while Dunelm gained market share to 7.9% and expanded gross margin by 10 basis points to 52.5% despite a challenging retail environment.
• Positive Sentiment: Strong cash generation lifted free cash flow to £155 million and reduced net debt to £95 million, supporting a 2.2% increase in the ordinary dividend to £0.455 per share, alongside a £0.25 special dividend paid during the year.
• Positive Sentiment: Digital momentum remained strong, with digitally enabled sales up more than 9% and digital participation reaching 42%; the app is generating basket values 40% higher than web-only customers.
• Neutral Sentiment: Productivity initiatives, including labor optimization and self-checkout rollout, offset inflation, logistics, wage, and investment costs, leaving profit before tax flat at £211 million.
• Negative Sentiment: First-quarter trading has been mixed, with unusually hot weather materially affecting the start of the period; management said performance normalized after cooler and wetter conditions returned.

Presentation

[Clodagh Moriarty, CEO at Dunelm Group]

Hello, and thank you for your interest in Dunelm, and for engaging in our full year results for FY 2026. We have had a solid year of performance, with 3.1% total sales growth, coupled with slight margin expansion to 52.5%, all in a year which continued to present challenges to the whole sector. Within the homewares and furniture GBP 25 billion U.K. market, we yet again gained share to 7.9%. Our customer satisfaction increased for another year, this time up 2.4%. I definitely want to highlight that this is already top quartile performance. It was encouraging to see this measure improve year-on-year. Through a number of efficiency and productivity initiatives, we also made strong inroads covering the on-cost of inflation, resulting in a flat year-on-year profit of GBP 211 million. Free cash flow was up to GBP 155 million from GBP 127 million.

[Clodagh Moriarty, CEO at Dunelm Group]

However, this was primarily driven by some heightened investments in the previous year as a result of our freeholds and acquisitions. You will all be aware of our drive to be present where our customers are, and hence have been calling out the role of digital within our business for a number of years now. Supported by continued web enhancements, the launch and scaling of our app, and store-assisted digital selling, we are currently at 42% digital sales, with consistent increases annually. Finally, we are very proud to communicate our growing ordinary dividend per share at GBP 0.455, up GBP 0.01 versus FY 2025. I hope you all know that our focus on our customers at Dunelm is a core part of what I and our team stand for. Internally, we refer to this as customer obsession, and that is increasingly driving our decision-making in our business.

[Clodagh Moriarty, CEO at Dunelm Group]

Therefore, it is important to see the overall year-on-year uptake in customer satisfaction. With renewed focus on service and in-store experience, supported by a revitalized store operating model, alongside the rollout of our self-service tills and a revamp of our in-store walkway, showcasing the very best of our offers or most relevant products, we drove an increase of 3% in our store CSAT. As trailed throughout the year, our growing Click & Collect offer came with an increased CSAT too. Whilst noting this has come from a lower base, enhancements such as the delivery of Click & Collect rooms at the front of store and pick by department functionality have facilitated ease and speed of pick, and hence customer experience.

[Clodagh Moriarty, CEO at Dunelm Group]

Home delivery remains on our watchlist, as whilst our own two-person delivery associated with our furniture proposition did increase year-on-year by 2 percentage points, our courier service enabled by third parties went back across the year. We do have a number of operational and technology-led changes in our plan to support improvement in this space, however. One of our key strengths and the reason our customers come back to us time and time again is because of our products. They are brilliant, whether that is one of the 6,000 new owned brand products we brought to the market last year, or from our full range repertoire. Whilst our Harton products continue to perform strongly, lighting in particular has gained more traction with our customers, up 8 percentage points year-on-year.

[Clodagh Moriarty, CEO at Dunelm Group]

We are also encouraged that following a Q2 availability challenge on furniture, our availability has been strong throughout the second half. Our 12 campaigns and events continue to play an important role with customers outside of our two core sale events. We flagged with you in Q2 the impact of Black Friday and the associated considerations for us looking forward. Relevance is key, and our focus on summer living paid dividend with our campaign matching the size and scale of our traditional winter warm performance, both of which were our top-performing campaigns. There is more to do in this space, however, as summer living hasn't historically been a key area of focus for us, and we know there was unmet demand.

[Clodagh Moriarty, CEO at Dunelm Group]

While relevance is important, having a point of view on design as a specialist is also critical, and our collaboration with Yinka Ilori from twinkle in the eye to product on shelves and online within 18 months demonstrated not only that, but the pace and precision of execution. One of the rugs in the range sold out within a day of launch, and the pink and green dining chair within a week. In areas like this, planned scarcity will continue to be a key factor. I should note that we are very proud of our availability metrics across our regular lines, which, supported by our strong forecasting and replenishment systems, continue to ensure we are on time and in full for our customers. This year has also been important for its continued reach across channels.

[Clodagh Moriarty, CEO at Dunelm Group]

We are not satisfied with the number of store openings and have bigger ambitions on this front moving forward. The quality and impact of the two new stores and one reopening we have had is excellent. With business-leading transaction levels for Kingston and continued access to London infills with Wandsworth, we continue to gain confidence with the choices we are making on proposition, on flow, and on format. We've also had some strong refits ensuring we are rolling out the tried and tested latest blueprint, and the high single-digit increases in St Albans we are now seeing year-on-year validates those choices. Finally, we continue to invest in stores that are not at the standard they should be, and later in the strategy update, we'll discuss this more.

[Clodagh Moriarty, CEO at Dunelm Group]

We are passionate about digital connectivity, not only because this is how our customers want to shop, but moreover, because it's how our customers shop in the most effective way with us, helping them bring larger baskets with more frequent shops. Our app gives us 40% higher basket value than web-only customers, which is already ahead of store-only customers and conversion through this channel is higher. This year, we've become more ambitious with our social channels, in particular TikTok and YouTube. However, whilst active, we firmly believe we can continue to grow these channels. We have to acknowledge that sometimes we are followers. We are definitely not fast enough and weren't on the app.

[Clodagh Moriarty, CEO at Dunelm Group]

But as a business, when we move, we move, and we are delighted to have been one of the first launch partners with Google on conversational commerce in Europe through our AI-powered shopping assistant, which if you're an iOS user, you can access now. The future's here. We do pride ourselves on service, but there is a big prize for efficient service. We are now 85% of the way through our self-checkout rollout with 2/3 of our customers shopping in this way where it's an option. As with all retailers, we have taken measures to combat shrink whilst improving colleague safety and are confident that these are working for us. It's nothing in isolation, but moreover prompts, triggers, cameras, tech, and people all in combination.

[Clodagh Moriarty, CEO at Dunelm Group]

I did want to give a big shout-out to our Made to Measure offer, which has historically been the perfect combination of product and service combined. At the end of this year, we layered in technology through Salesforce, which has enabled us to enhance fitter availability and will support MTM's double-digit growth moving forward. A lot going on this year, but I'll now hand over to Karen who will share the review of our numbers.

[Karen Witts, CFO at Dunelm Group]

Thank you, Clo. As usual, I will take you through our financial performance for the year ended 27th of June 2026. I'll give you a summary level overview, and we'll then go into more detail. As Clo said, we delivered a solid performance in FY 2026 with total sales up 3.1% to GBP 1,825 million. We delivered another strong gross margin performance with a gross margin of 52.5% up 10 basis points year-on-year. Net operating costs increased by just under 4% year-on-year. Profit before tax of GBP 211 million was flat year-on-year. PBT margin decreased slightly by 30 basis points but remained strong at 11.6%. Diluted earnings per share of GBP 0.768 was flat on the prior year. We delivered another year of strong cash generation with GBP 155 million of free cash flow, GBP 27 million higher than the prior year.

[Karen Witts, CFO at Dunelm Group]

Operating profit conversion to cash was up from 57% to 69%, supporting a GBP 7 million reduction in year-end net debt to GBP 95 million. At the end of the year, our net debt to EBITDA ratio was 0.3x, which is within our targeted range of 0.2x-0.6x. The board has declared a final dividend of GBP 0.285 per share, taking the full-year dividend to GBP 0.455 per share, a progression of 2.2% on the prior year. We also paid a special dividend of GBP 0.25 per share earlier in the year. We delivered just over 3% total sales growth within a challenging macro backdrop. Now, we've taken a slightly different approach to illustrating how sales grew.

[Karen Witts, CFO at Dunelm Group]

As a truly omnichannel business, there is of course an overlap between store-enabled sales, which comprise sales from walk-ins, from in-store tablets, and from Click & Collect, and digitally enabled sales, which comprise sales from home delivery and also in-store tablet and Click & Collect sales. Store-enabled like-for-like sales were up just under 1%. We further expanded the store estate, opening two new stores during the year, both in London, in Wandsworth and Kingston, and we reopened our Yeovil store, which had been closed following a fire. Digitally enabled sales grew by more than 9% and digital participation increased by a further 2 percentage points to 42%, leveraging the continued benefits of investment in our digital ecosystem. The launch of the Dunelm app has strengthened our proposition, creating additional opportunities to deepen customer engagement and deliver a more connected shopping experience.

[Karen Witts, CFO at Dunelm Group]

We saw broad-based growth across categories and heritage categories like textiles with established authority continued to underpin our sales growth. Made to Measure window treatments again delivered strong growth, demonstrating the value of our specialist expertise and the benefits of targeted investment in high growth categories. The net result was that we continued to outperform the total homewares and furniture market, increasing market share by 10 basis points year-on-year to 7.9%. We delivered another strong gross margin performance demonstrating the consistency of our model over time.

[Karen Witts, CFO at Dunelm Group]

This year, gross margin of 52.5% expanded by 10 basis points, benefiting from a foreign exchange tailwind, partly offset by increased customer participation in promotional events through the course of the year. We delivered to the cost plan that we set out at our interims presentation and, per my summary, net operating costs of GBP 734 million were up 3.9% year-on-year.

[Karen Witts, CFO at Dunelm Group]

Volume-driven costs, primarily variable logistics costs and performance marketing expenses, have grown in proportion to the growth in digital sales and added just under GBP 20 million year-on-year to our cost base. Inflationary pressures continued, driving more than GBP 20 million of incremental cost. Wage inflation remained the most significant headwind, although it began to moderate in the final quarter of the year due to a relatively lower rate of National Living Wage increase. We also experienced cost pressure in our supply chain from higher fuel costs driven by geopolitical events and increases in warehouse rental costs. We invested an incremental GBP 10 million during the year, primarily in our store estate. This was a combination of investment in new store renewals this year, a lower number than usual, partly offset by the annualized impact on cost of higher activity in the prior year.

[Karen Witts, CFO at Dunelm Group]

Productivity gains accelerated in the second half, as we said they would, delivering an incremental GBP 15 million over the full year. Savings were driven by operational improvement across the business, particularly labor optimization in stores, which was supported by the further rollout of self-checkout, alongside efficiencies in carriage costs, logistics and marketing. Other items contributed a year-on-year benefit of GBP 10 million. These included a GBP 3 million increase in net operating income related to insurance receipts in respect of two store fires, primarily compensating for the associated loss of trade. Given the challenging backdrop, performance-related remuneration costs were also lower in the prior year. We saw a benefit from business rates of about GBP 1 million, which will provide an annualized tailwind into next year.

[Karen Witts, CFO at Dunelm Group]

In summary, we used productivity gains and other cost reductions to help offset upward pressure from volume-driven costs, ongoing inflationary pressures, and continued investment for growth. Our net operating profit increased by GBP 2.9 million year-on-year, but net financing costs were also up GBP 2.9 million, driven by a higher lease interest charge, this year, GBP 10 million, prior year, GBP 7 million. Underlying interest costs remained broadly stable in line with net debt levels throughout the year. Profit before tax was GBP 211 million, flat year-on-year. Profit after tax of GBP 155 million was about GBP 1 million lower than the prior year, reflecting an effective tax rate of 26.3%, 40 basis points higher than the prior year.

[Karen Witts, CFO at Dunelm Group]

This was slightly higher than our historic average of around 50 basis points-100 basis points above the headline rate, and was largely due to an adjustment in respect of non-qualifying depreciation. Basic earnings per share was GBP 0.77 and diluted earnings per share was GBP 0.768, flat year-on-year. Cash generation increased in the year. Operating cash flow grew by 5.7% to GBP 270 million, benefiting from a GBP 9 million working capital inflow and higher operating profit. The working capital inflow was largely driven by lower inventory levels, partially offset by a corresponding reduction in stock-related payables. Capital expenditure of GBP 43 million was in line with guidance and lower than the prior year, which included investment in freehold property purchases and two small acquisitions.

[Karen Witts, CFO at Dunelm Group]

During FY 2026, CapEx primarily related to GBP 27 million invested in our store estate and GBP 13 million of tech-related CapEx, including investment relating to the build and launch of our app. The store investment related to the costs of opening two new stores, including significant work on our new Kingston store, seven major refits, and the continuation of our decarbonization program. Lease liability repayments were GBP 8 million higher year-on-year, primarily reflecting the expansion of the lease portfolio and the renewal of lease agreements. We generated GBP 155 million of free cash flow, GBP 27 million higher than the prior year, with operating profit conversion improving from 57% to 69%, supporting a GBP 7 million reduction in year-end net debt to GBP 95 million. Total dividend payments in the period were GBP 141 million.

[Karen Witts, CFO at Dunelm Group]

Just to note, the group also periodically makes share repurchases to hold in treasury to satisfy obligations under employee share schemes, and in the year repurchased GBP 16 million of shares. The board has declared a final dividend of GBP 0.285 per share, taking the ordinary total dividend for FY 2026 to GBP 0.455 per share, up 2.2% on the prior year, which is ahead of earnings and a mark of the board's confidence in the future prospects of the business. This was in addition to a special dividend of GBP 0.25 per share paid in April, taking total dividends declared to GBP 0.705 per share. Our net debt to EBITDA ratio ended the year at 0.3x, which is within our target range. To summarize, we delivered a solid financial performance with growth in sales, market share, and gross margin against a challenging macroeconomic backdrop.

[Karen Witts, CFO at Dunelm Group]

We mitigated the impact of inflation, invested in the business, and held profits flat. Our free cash flow generation was strong, allowing for that investment and increased ordinary dividend, and we paid a special dividend in the year. Q1 trading has been mixed so far, with the start of the quarter significantly impacted by the extremely hot weather. However, more recently, with cooler weather and wetter weather, performance has normalized. I will now hand back to Clo to close this presentation. Thank you very much for now.

[Clodagh Moriarty, CEO at Dunelm Group]

Thanks a million, Karen. That brings FY 2026 to a close. We are very excited today to be sharing in our strategy session our customer-led plan to unlock the growth we know we can capture and is summarized by our ambition to win hearts and homes. We will do this by becoming the homeware specialist with something for everyone, delivering seamless omnichannel experiences that customers love, and transforming our capabilities to drive sustainable growth. As we do this, we will make our business bigger, better, and bolder going forward. Thanks a million.

Participants

Executives

• Clodagh Moriarty, CEO
• Karen Witts, CFO