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EXTRA: Dunelm Sees "Encouraging" Start To New Year As Revenue Rises

LONDON (Alliance News) - Dunelm Group PLC on Wednesday said it has seen an "encouraging" start ...

Alliance News 13 September, 2017 | 4:21PM
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LONDON (Alliance News) - Dunelm Group PLC on Wednesday said it has seen an "encouraging" start to its new financial year, although it expects the trading climate to remain challenging, as investments and its Worldstores acquisition hit profit for its recently-ended financial year.

Shares in Dunelm were up 9% at 665.50p, the best performer in the FTSE 250 index Wednesday.

The home furnishings retailer reported a pretax profit of GBP92.4 million for the 52 weeks ended July 1, down from GBP128.9 million the prior year, as a rise in revenue to GBP955.6 million from GBP880.9 million was offset by a step up in operating costs to GBP372.3 million from GBP309.2 million.

Dunelm attributed the dip in profit to expected losses from its Worldstores business, increased investment, and a 0.5% fall in like-for-like store sales.

The small sales fall reflected warm weather dampening footfall in the first quarter, Easter falling later in 2017 and product availability issues due to disruption caused by the new Stoke warehouse. This was partly offset by sales growth in the fourth quarter supported by investment in seasonal ranges.

Worldstores, which Dunelm bought alongside the Achica and Kiddicare brands as part of its November 2016 WS Group acquisition, has helped Dunelm's e-commerce share grow. Online sales including Worldstores contributed 14% of total Dunelm sales over the year. Excluding Worldstores, online revenue would have been up 8.5%.

With the Worldstores contribution only being for seven months of the year, Dunelm added that "approximately 20% of our total order value now originates online". Excluding Worldstores, Dunelm's online growth was 24% for the year.

Dunelm stated that it had made "good strategic progress" over the year and has moved closer to its "goal of being the biggest and best multichannel homewares retailer in the UK".

Dunelm's market share in the UK is 7.9%. "Over the medium term we are aiming to double our sales to GBP2.00 billion," said the company, "with 30%-40% from our increasingly important online channel".

The retailer proposed a final dividend of 19.5 pence, taking its total dividend per share to 26.0p, up from 25.1p the prior year and representing year-on-year growth of 3.6%. In the prior year, Dunelm also had paid a special dividend of 31.5p.

Dunelm said sales for the first two months of its new financial year were "encouraging", with good like-for-like sales boosted by "favourable weather comparatives".

It expects to open eight new stores in the first half of the new year, with four already opened. For the full year, it intends to open 12 new stores, of which two are relocations. In financial 2017, the group added seven new stores to end with a total of 164 stores. It has also been undertaking a number of stores refits which saw 11 updated in financial 2017 and an intention to refit a further 10 in financial 2018.

"The Worldstores acquisition provides a step change in our online scale, product range and capability. Our reported profit for the year reflects an investment of nearly GBP28 million in the acquisition. The integration is going well and we remain confident in the benefits that it will generate," said Chairman Andy Harrison in a statement.

"We expect the trading climate to remain challenging with the disposable income of UK consumers under pressure. Nevertheless, we have a full programme of management actions underway to further improve the Dunelm customer proposition, both online and in-store, increase our business efficiency and support our colleagues," Harrison added.

Dunelm saw its chief executive officer, John Browett, leave at the end of August. It has yet to install an interim or permanent replacement, but said it has begun the search.

N+1 Singer analyst Matthew McEachran said Dunelm's "update and positive start to the first quarter underpins our assessment that the recent sell off and inflection point represent a great entry point for this stock", adding that "a significant amount of infrastructure and investment work is now bedded in which is a key factor behind better forward looking prospects versus historical growth, especially online".

"Short-term leadership uncertainty is unhelpful but management strength and depth means the interim can be managed," the analyst added.

By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews; Updated By Ahren Lester; ahrenlester@alliancenews.com.

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Security Name Price Change (%) Morningstar
Rating
Dunelm Group PLC 688.00 GBX -0.22 -
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