(Alliance News) - Dunelm Group PLC on Thursday said it expects annual profit in line with market expectations, after it reported third-quarter sales growth but noted tough market conditions.

Shares in the Leicester, England-based homewares retailer were down 4.9% to 1,021.00 pence each in London early Thursday.

In the 13 weeks ended March 30, the company's third quarter, sales rose by 3% annually to GBP435 million, it said.

Dunelm explained that the rise was driven by volume and came despite both the homewares and furniture markets remaining challenging.

It also noted growth in both store and digital channels, with digital sales participating in 37% of total sales. Digital includes home delivery, Click & Collect and tablet-based sales in store, the company noted.

For the financial year to date, sales are 4% higher at GBP1.31 billion.

Looking ahead, Dunelm expects financial 2024 pretax profit to be broadly in line with market expectations. Company compiled consensus average of analysts' expectations for the year is GBP202 million, which would be up 4.7% from GBP193 million in financial 2023.

It also noted that there are signs that the outlook for UK consumers "may be easing in some areas."

"We have delivered a resilient performance in Q3, with continued volume-based sales growth through a period of more challenging and volatile market conditions. Whilst discretionary spend remains under pressure, our relevant and attractive product offer continues to resonate with customers as they shop across our broad ranges to find quality and value for all areas of the home," said Chief Executive Nick Wilkinson.

"This performance reflects our deep-rooted understanding of our customers and the effectiveness of a total retail system which continues to drive growth across store and digital channels, bringing further market share gains. At the same time, our operational grip continues to mitigate ongoing cost headwinds and has supported a strong gross margin performance."

By Sophie Rose, Alliance News senior reporter

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