Dunelm reports 'strong growth' in sales over Christmas quarter

Dunelm Group updated the market on its second quarter on Thursday, reporting a 5% improvement in total like-for-like sales, which it said reflected “strong growth” across the total retail system, especially given the strength of the comparative period a year earlier where total like-for-like sales grew 10.8%.

The FTSE 250 home furnishings retailer said total growth, including the benefit of new stores, was 6.2% for the 13 weeks ended 28 December.

It said total like-for-like sales for the first half of the year increased by 5.6%, with total growth standing at 6.0%.

The company’s total like-for-like revenue for the second quarter was up 5% at £313m, while total group revenue was 6.2% higher at £32.4m.

Dunelm said its gross margin improved by about 110 basis points in the second quarter, mainly due to sourcing gains and lower product markdowns during the period.

It said it maintained its commitment to “everyday great value”, and did not participate in Black Friday or additional pre-Christmas discounting.

Margin improvements were made across all of its product categories, and in the year to date, it said its margin had improved by 120 basis points.

As its had previously announced, the firm successfully transitioned to its new proprietary digital platform during the quarter.

The board said it was pleased with both the smooth transition during switchover, and the growth on the platform since launch.

During the peak pre-Christmas season, it hosted “significantly more customers” on the website than the capacity on the previous system would have permitted.

The company also opened a new store at Bristol Cribbs Causeway in December, resulting in a portfolio of 171 superstores by the end of the period.

Dunelm said it was expecting to open three new superstores, including two relocations, during the second half of its financial year.

It added that, in line with its goal of extending product choice and value, it remained on track to add more than 6,000 new online-only products in the current year.

As part of that, it said it would “enhance” its spring 2020 offering with new products, including its 'Mindful Home' collection.

The group was still highly cash generative, the board claimed, reporting that as at 28 December, net debt was £68m, narrowing from £73m at the end of the prior financial year, with weekly average net debt during the half being £24m.

During the first half, the group paid out a special dividend of £65m and made two additional quarterly corporation tax payments as a result of a change in tax legislation.

Tax paid during the half was £20m higher than in the comparative period.

Dunelm said it was expecting profit before tax for the first half to be approximately £83m, after adjusting for the impact of the new accounting standard IFRS 16 'leases'.

In the prior year, profit before tax was £70m, which was calculated on an IAS 17 basis.

The board estimated that the impact of IFRS 16 had been to reduce profit before tax by around £1.3m in the first half of the 2020 financial year.

Dunelm said its expectations for the full year remained unchanged, since its update on 5 December.

“We are really pleased with our performance in the first half, building on the strong growth and profitability delivered last year,” said chief executive officer Nick Wilkinson.

“The second quarter was particularly strong in terms of sales and margin growth, on both one-year and two-year bases.

“The successful launch of our new digital platform during the quarter marked an exciting milestone for Dunelm.”

The transition to a “modern, flexible, cloud-native” platform had already improved the company’s customer experience, Wilkinson explained, and would allow the firm to “step change” its retail innovation capabilities going forward.

“Our customers have responded well to the new website during Christmas and winter sale trading.

“Our ambitious growth plans are centred on extending and enhancing our customer proposition, helping more customers than ever create a home that they love.

“We are excited by the significant opportunities ahead of us.”

As at 0853 GMT, shares in Dunelm were up 0.44% at 1,148p.