Dunelm to double openings in 2010 but remains cautious

However, he also warned that the retailer’s strong growth was likely to slow next year because of the football World Cup, a likely VAT increase and rising unemployment.

Adderley said the out-of-town retailer planned to open about 12 new shops – which would take its total number of UK stores to more than 100.

Dunelm, which sells products ranging from curtains and bed linen to kitchenware and lighting, reported a 6.8% rise in annual pre-tax profit to £52.5m, in line with City expectations and helped by a recovery in sales in the second half.

Recent trading has been particularly strong, and like-for-like sales climbed 16.1% in the 10 weeks to September 12. But despite growing evidence of an economic recovery Adderley sounded a cautious note for the year ahead.

He suspected there will be a slight slowdown in growth after Christmas and that the second half was unlikely to be as strong as the first.

Adderley said: “There are a lot of questions we are asking ourselves and we think consumers will start asking themselves post-Christmas, and that’s when we start to lose visibility about what’s going on.

“There’s a general election and probable VAT change in the Christmas period. Even the World Cup will have a material affect on trade  – it’s a time when people aren’t focused on shopping for the home, particularly if England have a good run and the weather is good.”

He added that an expected rise in unemployment and a squeeze on public spending could also crimp Dunelm’s growth next year.

Last year  Dunelm’s growth was boosted by the demise of rivals Woolworths and Rosebys, increased marketing spending and better management of stock.

Analysts said that they would upgrade their profit forecasts for next year, highlighting Dunelm’s strong current trading and the potential to drive growth by opening new stores.

Investec said it expected the new consensus forecast for 2010 pre-tax profit to increase from £54m to between £57m and £59m.

Broker Singer noted: “Store expansion remains a key driver of growth. The company is immature and it should be able to expand much faster in a weak property market.”