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Dunelm reports strong Q2 growth

Dunelm Group plc, the UK’s leading homewares retailer, reports the following trading update for the 13-week and 26-week periods ended 28 December 2019.

Revenue

Total like for like (LFL) sales increased by 5.0% in the second quarter, reflecting strong growth across the total retail system, especially given the strength of the comparative period (Q2 FY19 total LFL 10.8%).  Total growth, including the benefit of new stores, was 6.2%. Total LFL sales for the first half of the year increased by 5.6% with total growth of 6.0%.

Business development

As previously announced, we successfully transitioned to our new proprietary digital platform during the quarter. We are pleased with both the smooth transition during switchover and the growth on the platform since launch. During the peak pre-Christmas season, we hosted significantly more customers on the website than the capacity on the previous system would have permitted.

We opened a new store at Bristol Cribbs Causeway in December, resulting in a portfolio of 171 superstores by the end of the period.  We expect to open three new superstores (including two relocations) during the second half of the year.

In line with our goal of extending product choice and value, we are on track to add over 6,000 new online-only products this year. As part of that, we will enhance our Spring 2020 offering with new products including our ‘Mindful Home’ collection, designed to help everyone create a beautiful and tranquil home.

Balance sheet

The Group continues to be highly cash generative.  As at 28 December 2019, net debt was £68m (FY19: £73m) and weekly average net debt during the half was £24m.  During the first half of the year 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.

Overall financial performance and outlook

We expect profit before tax (PBT) 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, PBT was £70m, which was calculated on an IAS 17 basis.  We estimate that the impact of IFRS 16 has been to reduce PBT by approximately £1.3m in the first half of FY20.

Our expectations for the full year remain unchanged since the trading update released on 5 December 2019.

Comment from Nick Wilkinson, Dunelm’s Chief Executive Officer:

“We are really pleased with our performance in the first half, building on the strong growth and profitability delivered last year.  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 has already improved our customer experience and will allow us to step change our 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.”

Source : Insight DIY & Dunelm


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