Dunelm Group revenues improved last year as strong summer demand and a focus on value attracted cost-conscious shoppers against a gloomy economic backdrop.
The retailer, which sells items ranging from armchairs to kitchenware, said annual sales rise 3.8 per cent as customers responded well to its summer sale and outdoor living ranges, with warmer weather driving interest in seasonal products.
Dunelm's gross margin is now expected to come in 60 basis points higher on the year, driven by strong full-price sales and minimal discounting across seasonal categories.
But it cautioned there were still no clear signs of a sustained recovery in consumer confidence.
The company's pre-tax profit for this year is expected to be in line with forecasts, with analysts forecasting £210million.
Dunelm shares rose 4.12 per cent or 47.00p to 1,188.00p on Thursday, having risen over 7 per cent in the last year.
Dunelm has been investing in digital improvements, such as integration of AI-powered search, to improve customer engagement and retention.
Dunelm, which last week named Sainsbury's executive Clodagh Moriarty as its new chief executive, posted total sales of £1.77billion for the year ending 28 June, in line with market expectations
Analysts at RBC Capital Markets said in a note: 'Although we note that cost headwinds remain, most notably from wage inflation, we believe Dunelm should be able to offset some of this through improvements in digital and automation.'
Adam Vettese, market analyst for eToro, said: 'Dunelm’s latest trading update really helps soften the blow of a difficult consumer environment.
'Delivering 4 per cent sales growth in Q4 and 3.8 per cent for the full year, is an impressive result when you consider the bumpy macroeconomic backdrop.
'Digital sales now account for 42 per cent of Q4 turnover a clear sign that its online investments are paying off and that Dunelm is sitting pretty among the UK homewares sector.'
He added: 'However, even with this solid performance, management highlights that a true bounce-back in consumer confidence has yet to materialise.
'Operational agility and new store openings give the group good springboard potential for future growth, but headwinds from higher costs and subdued discretionary spending could keep a lid on short-term outperformance.
'All told, Dunelm remains a well-cushioned choice for investors seeking stability and income, though, it may not see a dramatic lift-off to reclaim record levels until household sentiment firms up.'
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