Dunelm’s pre-tax profits rocketed 69.3% to £46.2m in the 26 weeks to January 2 and the retailer is to double the size of its warehouse to support future expansion.

Like-for-like sales rose 15.4% in the period, but slid 0.2% in the seven weeks to February 20.

Adjusted for the calendar effect of the timing of the winter Sale, Dunelm notched up an underlying like-for-like rise of 6% in the most recent period.

Revenue rose 9.1% in the seven weeks, and jumped 26% to £254.2m in the half-year, when gross margin was up 200 basis points to 48%.

Dunelm chief executive Will Adderley said the strong results “reflect the strength” of the value homewares retailer’s ‘Simply value for money’ proposition.

“We expect consumer spending to weaken in 2010 compared with 2009 as a result of broader economic and political factors. However, our business is in excellent shape and our customer proposition remains compelling,” he said.

“I am confident even if like-for-like growth does prove challenging, overall Dunelm will continue to grow and to become even stronger.”

Dunelm will double the capacity of its warehouse in Stoke-on-Trent to enable the retailer to have between 150 and 200 superstores.

It operates 90 now, as well as 10 smaller-format shops.

The expanded warehouse will be operational by August. Dunelm also plans to move its head office “to support future business growth”.

Dunelm is returning £43m to shareholders, reflecting the “financial strength and the cash generative nature of our business”, according to the retailer.

Seymour Pierce analyst Freddie George said Dunelm’s interims were “well ahead” of expectations.

He raised his full-year pre-tax profit forecast from £68m to £75m.

Singer analyst Mark Photiades raised his forecast by 4.6% to £75.5m after “encouraging current trading”. He said: “The company is immature and it should be able to expand much faster in a weak property market.

“Dunelm has positioned itself as the authoritative out-of-town destination for homewares and home furnishings. The business is driven by value for money and choice, alongside a strong customer experience that drives loyalty and repeat visits.”“With just 90 superstores and many areas of the UK not covered, Dunelm has significant headroom for UK expansion. This expansion potential is a key differentiator between Dunelm and many of its retail peers and is the core driver behind the investment case.”➤ In the news: Adderley,

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