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Dunelm profits stall as Worldstores deal continues to drag

Shares in Dunelm surged 12pc in afternoon trading to 570.5p.

Profits at furniture retailer Dunelm have flatlined after taking a near £10m hit over the integration of online homeware business Worldstores.

The company booked a £8.9m charge linked to its takeover of Worldstores two years ago, causing pre-tax profits in the retailer’s last financial year, which ended in June, to edge 1pc higher to £93.1m.

Sales, however, increased by 10pc to £1bn, as the homewares business bucked the bitter conditions on the high street to attract more customers both in store and online.

Like-for-like sales, which are an important measure of growth used by the industry and exclude store openings and closures, rose by 4.2pc.

Nick Wilkinson, chief executive, said Dunelm was now working to simplify the business and preparing to re-launch its website, which would make it easier for customers to shop online.

"The UK retail environment remains challenging, but against this difficult background we have traded in line with expectations," he said.

Dunelm, which was founded nearly 40 years ago as a market stall business, snapped up Worldstores for £8.5m in 2016 in an effort to bolster its online operation.

Worldstores was on the brink of collapse when Dunelm swooped in. It owned brands Kiddicare and Achica, but had struggled to turn a profit despite recording annual sales of around £100m.

Dunelm was particularly interested in the technology behind Worldstore, which it wants to use to improve its own online sales and logistics operations.

Dunelm

Shares in Dunelm surged 12pc in afternoon trading to 570.5p.

While some bricks-and-mortar retailers are cutting back their store estates in the face of waning consumer confidence, Dunelm opened ten superstores last year.  The company now has 169 stores, employing around 10,000 staff.

Emily Stell, Globaldata’s lead analyst, said: “Dunelm’s acquisition of Worldstores at the end of 2016 has shaken the business and led to profit dips over the last two financial years.

“This next year will be crucial for Dunelm: to prove the acquisition on balance was a success, and to carve an ever-differentiated proposition from aggressive competitors, primarily value general merchandisers."

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