Tight supply chains force Dunelm to build up stock

Home furnishings retailer Dunelm has been forced to build up extra stock to offset problems in its supply chains, the retailer said on Thursday.

Last year’s disruption to supply chains which was caused when economies reopened after the pandemic, has meant that the business has stockpiled in recent months.

Its inventories reached £224 million towards the end of March, compared with £147 million two years earlier.

“As previously advised, we have been building a higher level of inventories to mitigate against ongoing supply chain disruption and to ensure better availability for our customers,” the business said.

This storage ended up costing Dunelm extra money, and it expects the inventory levels to remain fairly unchanged over the next three months.

Yet despite these costs, and added freight and raw material charges, the company managed to increase the margins on the products it sold.

It put this down to the winter sale – the proportion of products it sold at knock-down prices was lower than expected, which helped margins.

Third quarter sales rose 69% to £399 million in the three months to the end of March when compared with last year. Shops were closed in the opening months of 2021.

Even compared with the days before the pandemic sales are up. The first 10 weeks of the third quarter saw sales up 31% compared with the same period two years ago, just before Covid struck.

Chief executive Nick Wilkinson said: “It has been another good quarter for Dunelm with sustained growth across all of our homewares categories, particularly as customers ready their homes and gardens for the summer.

“Performance has been strong across all channels and our new facilities for e-commerce and furniture fulfilment are now fully operational, which will enhance our multi-channel proposition, whilst providing the capacity for further growth.

“Whilst the macro environment remains uncertain, with significant headwinds and increasing pressures on the consumer, our wide product range offers choice for every budget, whether replacing everyday essential items or refreshing a room in your home.”