Dunelm Full-Year Sales Down 3.9%

Dunelm Group plc, the UK's leading homewares retailer, provides an update on its current trading performance and financial position for the year to 27 June 2020. 

Trading update

As previously reported, total sales for the 10 weeks to 7 March grew by 7.9%. Total sales for the last 16 weeks (from 8 March to 27 June) declined by 29.0%, with store like for like ("LFL") sales down 49.7% and online growth of 85.2%.   

The table below shows the monthly total sales trend during the fourth quarter and the strength of the online offer. The strong recovery of sales in June was driven by a number of factors, including a level of pent-up consumer demand and the delayed start to our Summer Sale. 

We have been operating our digital fulfilment channels at record volume levels. Home delivery fulfilment from our central distribution facility exceeded previous record levels in every week since April, and our supplier partners have increased their 'direct to customer' fulfilment capacities (running at 4x pre-crisis levels) to meet increased demand. However, due to high demand, online availability, delivery lead times and service levels have been under pressure.  

Since the stores have fully opened, online home delivery sales have been c. 30% and click and collect have been c. 12% of the total sales mix respectively. As customers become more comfortable with the physical shopping experience under social distancing rules, we may see this digital proportion reduce, but it is difficult to predict future trends at this point in time.    

Financial performance and position 

At the start of the crisis we took quick and decisive action to manage our cash position and reduce our costs. We paused our overseas stock orders and asked our UK suppliers to stop replenishing our stores. Our Board and Executive team took voluntary pay reductions for three months and we cancelled the interim dividend. We made significant operational cost savings and effectively put our stores into hibernation, utilising the government Job Retention Scheme ("JRS") to preserve jobs where the work had temporarily gone away. The majority of our colleagues who were furloughed are now back at work. Claims under the JRS in FY20 were approximately £14.5m and we are no longer making claims in the new financial year. 

These actions enabled us to partially offset the financial impact of the store closure period and to maintain a strong balance sheet. Having been loss making in April and May due to stores being closed, we returned to profitability in June. 

Full year FY20 sales were £1,057.9m, a 3.9% reduction on the prior year (FY19: £1,100.4m).  We expect that our FY20 PBT² will be in the range of £105m-£110m (FY19: £125.9m). 

Outlook 

We have been pleased with the strong customer response since re-opening. Whilst the homewares market has proven to be relatively resilient, we continue to take a cautious view of the short to medium term outlook given the ongoing uncertainty around Covid-19. We will monitor consumer trends over the summer and, where possible, provide further guidance for FY21 at our full year results in September. 

In addition to demand uncertainty, FY21 will be impacted by cost headwinds directly related to the impact of the virus. Social distancing measures within the operating models of both stores and distribution have led to higher costs to operate for the short-term; in total, we estimate these costs to be around £150,000 per week. Furthermore, we will not be able to deliver some of the productivity savings that we had previously anticipated to offset wage inflation (e.g. National Living Wage increases). 

We expect that technology costs in the FY21 P&L will increase by around £8m as we continue to invest in our digital capabilities and no longer capitalise these costs on the balance sheet, as previously announced.  We will also be investing in supply chain capacity to meet the high growth ambition for our home delivery channels. 

We continue to develop our strategy of being a "customer first, digitally enabled business", taking into account all we are learning about our customers and operations during the pandemic. This has clarified our investment priorities and has led to a re-focus of our support centre functions, to ensure we maximise the opportunities ahead. We will provide more detail on these initiatives at the results in September. 

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

"We are incredibly proud of how our team and committed supplier partners have responded during the pandemic and of what we have achieved together. Our colleagues have demonstrated exceptional commitment, agility and resilience to adapt our proposition and operations and I would personally like to thank them all. 

"The decisions we have made over the last few months have been guided by our principles and values and we are emerging from this unprecedented period as a stronger business. This has given us the confidence to accelerate our digital transition and introduce new ways of serving our customers. There is lots more to do and we are energised to evolve our customer proposition and operations at pace, as we continue to navigate an uncertain external environment."

Source : Dunelm

Image : shutterstock.com / 282750725

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