Dunelm reports on half year trading and denies interest in Homebase

Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares retailer, reports the following trading update for the 26 week period to 2nd January 2016. 

Commenting on Dunelm's performance in the period, John Browett, Chief Executive, said:

"These trading numbers are a reasonable outcome given the unseasonably warm weather. We have had a very strong sale after Christmas and we expect further good progress in the second half.

"I am really pleased to have joined Dunelm. Clearly our proposition remains popular with customers and I look forward to working with the team here in fully delivering the potential of the business over the coming years."

Highlights

*Calendar impact 

Due to the 53rd week included in the last financial year, the above figures include eight days of our Winter Sale, compared to two days of Winter Sale included in the comparative period. This has boosted LFL growth by approximately £10.0m (equivalent to 4.7% in the quarter and 2.6% over the half year). These impacts will reverse in the next quarter. Therefore, adjusting for this calendar impact, underlying LFL performance was -0.8% for the 13 weeks to 2nd January and +2.0% for the 26 week period.

Underlying performance
Having adjusted for the beneficial calendar impact, sales performance in the quarter reflected:
- Reduced footfall in LFL stores which we attribute to the particularly mild weather, partially compensated by improved conversion and growing transaction values;
- Ongoing store portfolio expansion, with three new superstores opened and one major refit completed;
- Continuing growth in on-line business, including a +23.4% increase in home delivery sales.

Gross Margin
Gross margin percentage growth for the half year is estimated to be +30bps compared with the first half of last financial year. This included the impact of Winter Sale as described above, which is estimated to have depressed margin growth by -20bps in the quarter, and by -10bps over the half year.

Store Portfolio
The total number of superstores trading at the period end was 151. There are seven new stores committed, as at the period end, including two relocations. We expect three of these new stores to open in the remainder of this financial year, taking our total anticipated openings for the financial year to six including the two relocations. This will bring the year-end superstore count to 152. Our medium term target remains to operate from around 200 superstores across the UK.

Financial Position
The Group remains strongly cash generative with closing net debt of £48.1m (H1 15: net cash £61.4m), reflecting the cash returned to shareholders in H2 15. Daily average net debt across the half year amounted to £47.5m.

Source : Dunelm Press Release 

Homebase

Over the weekend it was reported that Dunelm had been in discussion with private equity groups about the possibility of buying Homebase,  Chief executive John Browett has denied any interest in the DIY retailer, stating:

"We don't want to buy Homebase. We are flatly not interested in taking it over." 

He added: "only a handful of Homebase stores that we would have any interest in and, of those, just a few that we would be confident we could make work".

Analyst view:

Martin Lane, spokesperson at www.money.co.uk gave us his comments on the results:

 “Dunelm’s results may be a tad disappointing, but the fact that their online sales have picked up considerably shows they haven’t dug their heels in and thrown all resources into their stores.  Instead they’ve really gone for it online, with a reserve and collect service that makes life easy for shoppers and upped their social media efforts-engaging with customers in a competitive market space. Their digital marketing departments have clearly been working hard and consumers are rewarding them for their efforts.” 

Source : Insight DIY Team