Homewares retailer Dunelm posted a 2,2% decline in like-for-like sales for Q3 but maintains the business is outperforming the rest of the market.

Dunelm Group plc reported its total revenue for the 13 weeks to April 1 rose by 11.4% to £255.1m. Total revenue, excluding the recently-acquired Worldstores, rose by 1% to £231.3m, while total like-for-like (LFL) growth (combining LFL stores and home delivery) declined by 2.2%.

The retailer blamed the figures on a homewares market that remains in decline but believes its business continues to outperform the market and that the margin of its overperformance has increased.

Dunelm added that the timing of Easter this year means it expects around 1.5% of LFL sales to move from the third to the fourth quarter. This change broadly balances with the 1.7% of LFL sales that moved from Q2 to Q3 due to the timing of its winter sale, compared with last year.

Dunelm’s online business saw continued growth, including a 21% increase in home delivery sales for the quarter.

Dunelm's gross margin percentage (excluding Worldstores) for the quarter increased by approximately 75bps. This reflects a short-term benefit, and the company expects half of this benefit to continue into the fourth quarter. The run rate of gross margin going into the next financial year is expected to be broadly flat compared to the same time last year.

 The integration of Worldstores, which Dunelm bought in November last year, is said to be going well, with the furniture chain’s performance “continuing to stablilise following the acquisition and in line with expectations”, said Dunelm. It is predicts the business will be at least break-even in Dunelm's financial year, ending June 30, 2018.

Worldstores' gross margin percentage in the quarter improved by approximately 500 bps compared to the first five weeks of trading under our ownership, as our ongoing stabilisation of the business and focus on customer service reduced the level of cancellations and returns.

Dunelm’s ownership of Wordlstores will allow the group to accelerate the growth of its internet operation and enhance its position as a destination homewares retailer in the UK, both online and offline.

It plans to develop a next-day delivery proposition for a much wider range of products including furniture, as well as developing a new technology platform to enable faster development of products and services. It has also announced plans to start offering Kiddicare products in Dunelm stores.

Dunelm opened two new stores in the period – a total increase of seven store openings this year – and taking its superstore footprint to 159 stores. The group is now legally committed to a further five new stores, of which at least one is due to open in the current financial year, and two are to open very early in the next financial year. The business has also completed six store refits within the year to date and has at least five planned for the remainder of the financial year.

Commenting on Dunelm's performance, chief executive  John Browett said: “We are trading in a volatile retail environment at present, but have continued to outperform the homewares market and so enhanced our position as market leader. As a result, our expectations for the full year remain unchanged.

"We remain excited by the acquisition of Worldstores. The business has stabilised and our integration plans are developing well.  Our home delivery channel goes from strength to strength and will be enhanced by the significant benefits that the acquisition provides to our product range, including the Kiddicare brand, delivery, and speed of IT development.  

"We continue to focus on and invest in our long-term growth initiatives, to ensure that Dunelm's low cost model remains a key strategic advantage allowing us to generate cash whilst maintaining our unique offer of value for money, an unrivalled range and great service."