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Retail Viewpoint – Dunelm

Q3 sales growth at Dunelm but margins drop

Dunelm’s like-for-like store sales rise should be praised given the treacherous weather in February that devastated home retail – although store sales have slowed from the 3.5% growth logged in H1. Investors agree, and shares rose 8% in early trading. has been a particular area of strength for the business, bolstering total like-for-likes to 4.6%. But the same cannot be said for the performance of, and, where sales declined £7.8m on last year. This ‘partially reflects’ the disposal of Achica, but, more of a concern is the implied underwhelming performance of Worldstores and Kiddicare.

The homewares leader continues to struggle with margins – this time from core Dunelm, where margins were down 95 bps, partly caused by a high proportion of end-of-season sales. On the upside, margins at Worldstores have finally improved and despite Worldstores expected to hinder profits this financial year, we believe the acquisition will ultimately prove profitable.

Compared with this time last year when Dunelm was ‘legally committed’ to opening in excess of 10 new stores, the retailer has no new stores planned, leaving the estate at 169 stores. This is a clear signal that Dunelm’s focus is online, with the aim for this to comprise 30-40% of the business in the ‘medium term’.

Source: GlobalData 18 April 2018

April 2018

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