Dunelm Q1 sales up on digital, in-store demand

UK home furnishing retailer Dunelm on Thursday reported a 37% jump in first-quarter sales, boosted by higher online demand, as well as a recovery in its stores after Covid-19 lockdowns were eased.

Dunelm, which sells goods such as cushions and kitchenware, said sales rose to £359.1m for the 13 weeks to September 26. It pulled full year guidance as Covid-19 restrictions were reintroduced across parts of Britain. Digital sales rose 29.7%.

Gross margin rose by 100 basis points year on year, driven by a lower proportion of discounted sales, which reflected strong demand, as well as sourcing improvements, the company added. It expected full year margins to be slightly positive year over year, barring any further Covid-19 related disruption or restrictions.

“The homewares market continues to be resilient and we are materially outperforming the market. Trading in the first quarter was significantly ahead of our expectations and current trading remains very robust,” Dunelm said.

“However, given the significant uncertainty relating to further Covid-19 restrictions and the implications for the economic outlook, at this early point in the financial year, the range of potential outcomes for full year 2021 is unusually wide and we are therefore unable to provide any meaningful guidance,” it added.

Analysts at investment bank Peel Hunt reiterated their 'buy' recommendation for the company and upgraded their target price to 1,700p from 1,600p.

They also upgraded pre-tax profits by around 14% and pencilled in a return to dividends while upgraded full year revenue estimates by just over £100m, or 9%, to £1.3bn.

The analysts noted that “the strength in home sales across the market is not news today, but the excitement remains the way in which Dunelm is building its market standing from this trend, with significant gains in active customers and more store customers moving online for the first time".