Q1, 13 weeks ending 25th September Q1 total sales are +8.3%, in line with the first 10 weeks of trading – when sales growth was described as up in “high-single-digit” territory (as we understand). As a reminder, full year consensus estimates assume total sales growth of c. 9.5% and we note Q1 benefitted from the postponement of the June Summer Sale into July. As expected, gross margins were down 10bps, reflecting the Summer Sale timing impact which was offset by a higher mix of full price sales, and sourcing gains to offset anticipated cost price increases. Full year guidance remains for gross margins to be down 50bps to 75bps, but management also now expects H1 gross margins to be “flat to slightly up” implying gross margins are expected to be down c. 100bps to 150bps in H2 given the period will contain two Sale periods. Elsewhere, net cash was £209m (LY: £175m) and inventories were £168m (Q1 FY21: £136m, Q1 FY20: £161m) implying good stock availability. Outlook: Management is mindful of industry-wide supply chain disruption and inflationary pressures building, but believes it has some relative immunity given “a lower proportion of seasonal ranges within its offer”; as such, it expects to meet full year expectations. View Going forward, we estimate that total sales will need to be c. +10% for the remainder of the year for full year consensus expectations to be met, and whilst comparatives ease over the remaining three quarters we still think expectations are demanding if spending on home improvement begins to normalise back to pre-pandemic levels, as consumers likely switch spending back to leisure. We note there are visible signs of ‘lockdown winning’ categories already showing signs of slowing growth, as evidenced in BRC data and recent results reported by, inter alia, ASOS, boohoo, AO World and Next homewares. As outlined in our recent initiation (see here: Dunelm: "Navigating around a cul-de-sac", 07/10/2021), we believe that outer year consensus sales and profit expectations look stretched given the likelihood that recent elevated demand has been pulled forward and that growing the active customer base (predominately through the online channel) will prove costly, while a margin dilutive channel shift could mean returning margins back to pre-pandemic levels will prove tricky. Recent industry-wide margin headwinds are another yet headache. On 18.8x CY22E PE, in our opinion the valuation provides little protection against the risk of downgrades.