September 13, 2017 / 6:28 AM / 3 years ago

Dunelm says trading picks up after difficult year

(Reuters) - Dunelm Group Plc (DNLM.L), the British homewares retailer which abruptly parted company with its chief executive last month, said trading had been encouraging in the first two months of its latest financial year.

The positive comments contrasted with a 0.5 percent contraction in comparable sales for the year to July 1 and lifted shares in home furnishings specialist by almost 10 percent to their highest level in over eight months.

Two weeks ago, the retailer sprang a surprise when it said Chief Executive John Browett was leaving after just over two years in charge.

Chairman Andy Harrison said the company was aiming over the medium-term to double annual sales to 2 billion pounds.

However, it pointed to pressures in the short-term as rising inflation limits the spending power of many Britons.

“We expect the trading climate to remain challenging with the disposable income of UK consumers under pressure,” it said on Wednesday.

The company had long enjoyed rising sales for its ranges of items such as cushions, bedding and kitchen equipment, but many consumers have reined in spending over the last year.

The company outperformed the FTSE Mid-cap .FTMC between 2012 and 2016 but lags the index since the Brexit vote in June of that year.

However, analysts at Morgan Stanley noted the commentary on current trading and called the start “fairly encouraging”.

The brokerage has a target price of 520p on the stock along with a “underweight” rating.

Shares in the company were up 8.9 percent at 665p at 1120 GMT.

(The story removes reference in paragraph seven to “big-ticket” items.)

Reporting by Rahul B and Noor Zainab Hussain in Bengaluru; editing by John Stonestreet/Keith Weir

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