Shares in home furnishings giant Dunelm have suffered a dramatic fall after the retailer warned that a slowdown in sales over the crucial Christmas period will hold back its profit growth for the year.
Sharp Slowdown in Quarterly Sales
The company reported that sales growth slowed sharply to just 1.6% in its second quarter, covering the 13 weeks to 27 December. This marked a significant deceleration from the 6.2% growth it achieved in the first quarter of its financial year. The news triggered an immediate market reaction, with Dunelm's share price plunging by 18% in morning trading on Thursday 15 January 2026.
As a direct result of this weaker trading performance, the retailer now expects its full-year pre-tax profit to land at the lower end of its previous guidance. The forecast range has been set at between £214 million and £227 million.
Challenging Festive Season and Competitive Pressures
Chief Executive Clo Moriarty, who took up the role in October after serving as chief retail and technology officer at Sainsbury's, described the half-year as a tale of two quarters. "The performance reflected a strong first quarter followed by a more challenging close to the half," she stated.
The company pointed to a difficult Black Friday period and the run-up to Christmas as particularly tough. It blamed the "ongoing challenging macroeconomic environment" and highlighted an especially high level of competitive activity in both digital marketing and discounting. This intense competition saw online rivals aggressively promoting deals during the key trading window.
Digital Growth Amidst the Challenges
Despite the overall sales pressure, Dunelm's continued investment in its online operations showed progress. Over the Christmas period, 42% of total sales were made online, a notable increase from 40% during the same festive season the previous year. This underscores the strategic importance of its digital offering.
Looking ahead, Ms Moriarty confirmed the company is acting on lessons from the first half, including "targeted steps to improve availability". She acknowledged that the UK retail environment remains variable.
Expansion Plans Continue Unabated
In a sign of confidence in its long-term strategy, Dunelm is pressing on with its store expansion plans. This commitment comes despite the weaker Christmas trading. The chain, which opened its second London store in Wandsworth in November 2025, has confirmed it will open two further superstores.
The update reveals the persistent pressures facing the retail sector, where even modest sales growth can fail to translate into expected profitability amid high operational and marketing costs.
