UK retailer Dunelm warns of price rises after profit slump

(Reuters) - British homewares retailer Dunelm Group Plc (DNLM.L) said half-year pretax profit fell 26 percent, hurt by a weaker market and short-term disruption to the supply chain at its recently acquired Worldstores business.

Dunelm, which sells items including bedding, curtains and furniture, warned that it would increase prices on a number of products in the coming months to offset the impact of a weak pound.

"Retail prices have been increased on a small number of products to negate the impact to margin; we expect to put through further price rises on a number of categories in the second half," the FTSE mid cap retailer warned.

Shares in the company were down 8.8 percent at 624.5 pence as of 1030 GMT, after hitting their lowest since Jan. 2013 earlier in the session.

Dunelm operates 161 stores, of which 157 are out-of-town superstores and the other four located on high streets.

Robust growth in consumer spending has been one of the main factors sustaining Britain's economy since the Brexit vote last June. However, retailers fear spending will fall as inflation erodes real earnings growth.

Last month, Halfords (HFD.L), the country's largest bike seller, also said that a slump in sterling makes it inevitable that prices will rise in 2017.

Dunelm said like-for-like sales for 26 weeks to Dec. 31 -- the first half of its financial year -- were down 1.6 percent and the retailer warned that market conditions remained "challenging".

In November, it bought WS Group in a deal worth 8.5 million pounds to double the size of its internet operation and add brands such as Kiddicare and Achica to its portfolio.

(Reporting by Rahul B in Bengaluru; Editing by Biju Dwarakanath/Keith Weir)