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Dunelm Group PLC

Dunelm Group YoY Growth +5.8% in trading update

Dunelm Group plc (LON: DNLM), the UK’s leading homewares retailer, has reported the following trading update for the 13-week period ended 28th September 2019.

Revenue

Total like for like (LFL) sales increased by 6.4% in the first quarter with good growth across the total retail system. Total Dunelm growth was 7.5% including the benefit of new stores. The beginning of the quarter was particularly strong, reflecting continued market share gains and the weak comparative period last year. In September trading was mixed, in part reflecting a softer homewares market.

Comment from Nick Wilkinson, Dunelm Group Chief Executive Officer:

“We are pleased with our performance in the first quarter, building on the strong growth delivered over the last year. Our customers continue to respond well to our specialist product and service offering and we are excited by the numerous opportunities ahead of us.

“The launch of our new digital platform will be an important milestone in this phase of Dunelm’s development. Once fully live, we can really begin to enhance and extend our offering and customer experience.

“Despite the recent softness in the homewares market and the increased political uncertainty, we are confident we can continue to win market share and our expectations for the full year remain unchanged.”

1 LFL stores: stores trading for at least one full financial year prior to 30 June 2019 without any change of space. LFL store revenues include Reserve & Collect sales and Home Delivery sales in respect of orders placed via in-store tablets.

2 Total LFL: LFL stores and Dunelm.com. The process for obtaining a refund for online purchases in store has been changed to minimise the risk of fraudulent returns. This process change has increased the attribution of refunds to the online channel. Total LFL is unaffected and therefore, as the business becomes more multichannel, is a more meaningful measure of overall performance.

3 Non-LFL stores: new stores (including relocations) opened in the current or previous financial year and existing stores with significant change of space in the current or previous financial year.

4 Closed businesses: sales from Worldstores.co.uk and Kiddicare.com. These websites were closed in Q1 FY19

Gross Margin

Gross margin improved by approximately 130bps in the first quarter, mainly as a result of the lower levels of clearance stock compared to the prior year and the continuation of sourcing gains. For the full year, we expect gross margin to be consistent with last year, with improvements in the first half likely to be offset by FX headwinds towards the end of the financial year.

Financial Position

The Group continues to be highly cash generative. As at 28 September 2019, net debt was £24.0m (FY19: £109.0m) and weekly average net debt during the quarter was £5m. The previously announced special dividend and FY19 final ordinary dividend will be paid during the second quarter.

Business development

We continue to test our new digital platform with a small percentage of our customers and are pleased with the results to date. We are planning to transfer all traffic to the new website before Christmas but will retain flexibility within our transition plans to ensure we provide the best experience for our customers during the peak period.

As part of our focus on broadening and deepening our customer base, during the quarter we launched the latest adverts in our Home of Homes campaign, across TV, social and digital channels, with real customers illustrating the breadth of our offering and our customer base. We have also rolled out a new POS till system across our store estate, improving the speed of service to our customers.

We opened a new superstore in Boston, Lincolnshire in July, which led to the closure of the two Boston high street stores. At the end of the quarter, we had 170 superstores. We have acquired the freehold of a new store at Cribbs Causeway in Bristol, which we expect to open before Christmas.