Dunelm guides toward higher full-year profits

Dunelm saw sales accelerate over the past three months even as margins increased, leading management to forecast full-year profits before tax would come in towards the upper end of its previous guidance range.

Over the 13 weeks ending on 29 June, total group sales at the home furnishings retailer jumped by 11.6% year-on-year to reach £264.1m, with like-for-like revenues at its stores ahead by 12.1% to £205.5m and by 370% to £39.0m at its online arm.

Total gross margins increased by 160 basis points and by 200 points at the core level.

Company boss Nick Wilkinson highlighted the "strong" growth seen in the last quarter of the trading year, Dunelm's continued investment in its digital capabilities, and the longer-term opportunities for growth.

But in the short-term, the "uncertain political climate" might impact on client spend, he said.

"We see significant opportunity for continued growth both from our stores and online, whilst maintaining our improved operational discipline.

"In the short-term, we remain cautious about the uncertain political climate and the impact it may have on consumer spending, but expect to make further progress in the year ahead and are confident about the Group's longer-term prospects."

Helped by "higher operating profits, positive working capital management and the timing of capital investment at year end", Dunelm reduced its net debt from £124.0m one year ago to £25.3m as at 29 June.

Commenting on the company's net debt position, which they said was running at roughly £40m on an underlying basis, analysts at Peel Hunt said it was "much better" than forecast, adding that it suggested that "an autumn special dividend is highly likely".

Peel Hunt was at 'add' with a 1000p target price on Dunelm.

For the full year, profits before tax were now seen at the upper end of the £124.0-126.0m range announced on 20 June, versus £102.0 in the 2018 financial year.

-- More to follow --