Interims are a slight miss due to costs, and increased cost guidance, especially WS losses, points to downgrades of c4% this morning, which is disappointing so soon after the pre-close. The dividend was better than expected though driven by confidence in the future potential, which hasn’t changed, and cash generative dynamics. Significant investment in the last 2-3 years, incl. areas with rapid payback, and a low-ticket bias (£30 ATV), mean DNLM isn’t reliant on the backdrop. In particular, integration benefits from WorldStores have turbo-charged its online and category capability, further distancing it from the discounters. Key to today is a positive update on strategic growth initiatives, and reassurance on reversing H1 gross margin mix dilution (H2 margin expected to be c+100bps). But the additional costs/losses at WS are a disappointment. Whilst the previous lack of clarity about the growth strategy has been addressed (CMD, 11 Oct), recovering confidence in Dunelm’s potential and online growth may be set-back today, albeit temporary. Weakness in the shares, should it materialise, would present an opportunity.