Dunelm beats the forecasts again

The Leicester-based firm, which has 106 stores under the Dunelm Mill name, reported growth of 2.1 per cent, beating City expectations that its sales could fall by as much as 5 per cent due to strong comparisons with trading a year earlier.

Dunelm said it was encouraged by the strength of demand in the first quarter but warned that it expected market conditions to remain tough.

Last month it reported a 46 per cent rise in pre-tax profits to 76.8m as its position in the value-for-money sector continued to attract shoppers.

Mark Photiades, an analyst at Singer Capital Markets, described the statement as encouraging and said he expected the City's forecast for profits in the year to July to increase by around 8 per cent to 88m.

He added: "We continue to believe that Dunelm is an extremely well run retailer with significant expansion potential. That said we are wary of the likely deterioration in the consumer environment in 2011."

Dunelm opened three new superstores in the quarter, including the relocation of a shop in Hereford, as it pressed on with a plan to build a UK-wide portfolio of 200 outlets. A further five openings are planned in the current quarter.

It has also extended the range of products sold under the Dorma brand to include bathroom, gift and tableware lines.