Dunelm Reports 15.4% Rise in Q4 LFL Sales

Dunelm Group has reported on fourth-quarter trading, covering the 13-week period ended 29 June 2019. 

Revenue 

Total like-for-like (LFL) revenue for the fourth quarter increased by 15.4%, reflecting strong underlying growth in stores and online, the benefit of a weak comparator period last year and favourable weather this year. 

-     Q4 LFL store revenue increased by 12.1%
-     Q4 LFL online revenue on Dunelm.com continued to grow strongly in the quarter, up 37.0%

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

"In the year that Dunelm turned 40, we are delighted that both new and existing customers continue to respond positively to our evolving offer. The strong growth in the final quarter, and the year as a whole, demonstrates that in a rapidly changing marketplace, the broad appeal of Dunelm's purpose 'to help everyone create a home they love' is resonating well.

"We continue to invest in the business, particularly in strengthening our digital capabilities and reaching more customers through our brand marketing initiatives. 

"Looking forward, as the UK's leading homewares specialist, we see significant opportunity for continued growth both from our stores and online, whilst maintaining our improved operational discipline. In the short-term, we remain cautious about the uncertain political climate and the impact it may have on consumer spending, but expect to make further progress in the year ahead and are confident about the Group's longer-term prospects."

Gross Margin 

In the fourth quarter, gross margin increased by approximately 240bps at Group level. Core Dunelm margin improved by 200bps in the quarter, driven by better sourcing and a lower level of end of season clearance compared to the same period last year.  Sales from the Worldstores businesses were a smaller proportion of total revenues in Q4 FY18, and therefore the positive margin impact of closing these dilutive websites was reduced to 40bps in the quarter. 

For the full year, we expect total Group margin to have improved by approximately 160bps, with core Dunelm margin improving by around 100bps.

Overall Financial Performance 

We expect full year profit before tax to be towards the upper end of the range of £124m - £126m announced in the trading update on 20^th June 2019 (FY18 underlying PBT: £102m).

The group continues to be highly cash generative.  As at 29 June 2019, net debt was £25.3m (FY18: £124.0m) and weekly average net debt during the second half of the year was £20.6m.  Net debt was lower than expected due to higher operating profits, positive working capital management and the timing of capital investment at year end.

Business development 

We are continuing to progress the phased roll-out of our new digital platform. We will fully transfer onto the new platform during FY20, proceeding carefully through the beta phases in order not to disrupt the strong growth on the existing website.  

During the quarter, we continued to invest in raising brand awareness.  A re-run of the ad-funded Back to Mine programme on ITV1 in April and additional marketing spend in May gave us a strong run in to our Summer Sale campaign. Our sponsorship of This Morning continued throughout the period. 

There were two new store openings towards the end of the quarter (including one relocation), increasing our store footprint to 170 superstores.  We expect to open two new stores (including one relocation) in the first half of FY20.

Source : Insight DIY Team and Dunelm

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