Q1 Sales Boost For Dunelm; Furlough Cash To Be Repaid

Dunelm Group plc, the UK's leading homewares retailer, reports on trading for the 13-week period ended 26 September 2020.

¹ Digital includes home delivery, Click & Collect (previously Reserve & Collect) and tablet-based selling in store

Revenue

Total sales in the quarter were £359.1m, an increase of £96.5m year over year, as we continue to win market share in a buoyant homewares market. We announced at the start of September that trading in the first two months of the financial year had been materially ahead of our initial expectations. This trend has continued, with the final month of the quarter also being very strong. We have delivered meaningful growth across our total retail system, with online (home delivery) sales growth continuing at the levels previously reported, and strong growth in stores. 

Gross margin 

Gross margin increased by 100bps compared to Q1 FY20, mainly due to a lower proportion of discounted sales, reflecting strong demand, as well as sourcing improvements. For the full year, we expect gross margin to be slightly positive year over year, barring any material further impacts as a result of Covid-19 related disruption or restrictions. 

Financial position

Net cash was £175.2m as at 26 September 2020 (FY20: net debt £24.0m). As previously highlighted, the FY20 cash position benefited from approximately £80m of exceptional working capital inflows. As at the end of the first quarter, only a small proportion of those working capital inflows had reversed and additionally the cash balance was flattered by the timing of the September month end payment run of approximately £60m, which was paid at the start of the second quarter.

Operations and strategic update

We continue to monitor the current guidance relating to Covid-19 carefully, with colleague and customer safety being our priority. At the time of writing, we have not experienced any significant disruption from the various regional restrictions that have been introduced across the country; however, we recognise that the situation remains dynamic with a number of ongoing risks and uncertainties. We remain focused on ensuring that our stores and operations provide a safe and welcoming environment.

Since year-end, we have opened two new stores, both of which are relocations, in Sunderland and Clydebank. As well as improving our customer experience, we continue to make progress on reducing the impact of our store estate on the environment, with both stores being heated by efficient heating systems powered by 100% renewable electricity. The stores are fully LED-illuminated, in line with the rest of the estate.

We continued to refine and add functionality to our digital offering and platform during the quarter, with new customer features such as product recommendations and 'track my order'. We have also increased capacity in home delivery fulfilment and warehousing ahead of our peak trading season.

As a result of the recent strength in performance, the Board has decided that it will repay the monies received under the Job Retention Scheme ("JRS") in FY20, provided there is no further material Covid-19 related impact during the winter months. The JRS claims for FY20 totalled £14.5m. As noted previously, we have not claimed any monies under the JRS in FY21 and will not claim the JRS "bonus" announced by the Chancellor. 

Outlook

The homewares market continues to be resilient and we are materially outperforming the market. Trading in the first quarter was significantly ahead of our expectations and current trading remains very robust. 

However, given the significant uncertainty relating to further Covid-19 restrictions and the implications for the economic outlook, at this early point in the financial year, the range of potential outcomes for FY21 is unusually wide and we are therefore unable to provide any meaningful guidance. 

Whilst acknowledging the potential macro headwinds, we remain confident that the strength of our proposition, coupled with the skills and commitment of our colleagues, will enable us to successfully navigate the months ahead.

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

"We are really pleased with our very strong performance in the first quarter, with customers responding well to the Dunelm offer across all product categories, both in-store and online.

"Recent months have seen homewares become even more relevant, as people spend more time in their homes up and down the country. Our colleagues and suppliers have worked really hard to ensure our value focused, market leading proposition resonates with customers. The strength in trading at this early point in the year is testament to their exceptional commitment and adaptability.

"While we remain cautious about the continued uncertainty in the wider market, the resilience and flexibility of our business model leaves us well positioned as we enter our peak trading period and we remain confident in our ability to grow market share and help even more customers create a home they love."

Source : Dunelm PLC

For all the very latest news and intelligence on the UK's largest home improvement and garden retailers, sign up for the Insight DIY weekly newsletter.