Dunelm Group plc
Second Quarter Trading Update
Dunelm Group plc (“Dunelm” or “the Group”), the UK's leading homewares retailer, reports the following trading update for the 13-week and 26-week periods ended 28 December 2019.
Revenue
Total like for like (LFL) sales increased by 5.0% in the second quarter, reflecting strong growth across the total retail system, especially given the strength of the comparative period (Q2 FY19 total LFL 10.8%). Total growth, including the benefit of new stores, was 6.2%.
Total LFL sales for the first half of the year increased by 5.6% with total growth of 6.0%.
|
|
13 weeks to 28 December 2019 |
26 weeks to 28 December 2019 |
||||
|
|
Revenue (£m) |
YoY Growth (£m) |
YoY Growth (%) |
Revenue (£m) |
YoY Growth (£m) |
YoY Growth (%) |
|
LFL Stores1 |
265.3 |
+3.2 |
+1.2% |
485.2 |
+9.4 |
+2.0% |
|
Online – Dunelm.com |
47.7 |
+11.6 |
+32.1% |
83.4 |
+20.8 |
+33.2% |
|
Total LFL2 |
313.0 |
+14.8 |
+5.0% |
568.6 |
+30.2 |
+5.6% |
|
Non-LFL Stores3 |
9.4 |
+3.6 |
– |
16.4 |
+6.6 |
– |
|
Total Dunelm |
322.4 |
+18.4 |
+6.1% |
585.0 |
+36.8 |
+6.7% |
|
Closed businesses4 |
– |
+0.4 |
– |
– |
-3.6 |
– |
|
Total Group |
322.4 |
+18.8 |
+6.2% |
585.0 |
+33.2 |
+6.0% |
1 LFL stores: stores trading for at least one full financial year prior to 30 June 2019 without any change of space. LFL store revenues include Reserve & Collect/Click & Collect sales and Home Delivery sales in respect of orders placed via in-store tablets.
2 Total LFL: LFL stores and dunelm.com. The process for obtaining a refund for online purchases in store has been changed to minimise the risk of fraudulent returns. This process change has increased the attribution of refunds to the online channel. Total LFL is unaffected and therefore, as the business becomes more multichannel, is a more meaningful measure of overall performance.
3 Non-LFL stores: new stores (including relocations) opened in the current or previous financial year and existing stores with significant change of space in the current or previous financial year.
4 Closed businesses: sales from Worldstores.co.uk and Kiddicare.com. Those websites were closed in Q1 FY19. The negative sales in Q2 FY19 reflected refunds processed by those businesses.
Gross margin
Gross margin improved by approximately 110bps in the second quarter, mainly due to sourcing gains and lower product markdowns during the period. We maintained our commitment to everyday great value and did not participate in Black Friday or additional pre-Christmas discounting. Margin improvements were made across all of our product categories. In the year to date, margin has improved by 120bps.
Business development
As previously announced, we successfully transitioned to our new proprietary digital platform during the quarter. We are pleased with both the smooth transition during switchover and the growth on the platform since launch. During the peak pre-Christmas season, we hosted significantly more customers on the website than the capacity on the previous system would have permitted.
We opened a new store at Bristol Cribbs Causeway in December, resulting in a portfolio of 171 superstores by the end of the period. We expect to open three new superstores (including two relocations) during the second half of the year.
In line with our goal of extending product choice and value, we are on track to add over 6,000 new online-only products this year. As part of that, we will enhance our Spring 2020 offering with new products including our 'Mindful Home' collection, designed to help everyone create a beautiful and tranquil home.
Balance sheet
The Group continues to be highly cash generative. As at 28 December 2019, net debt was £68m (FY19: £73m) and weekly average net debt during the half was £24m. During the first half of the year the Group paid out a special dividend of £65m and made two additional quarterly corporation tax payments as a result of a change in tax legislation. Tax paid during the half was £20m higher than in the comparative period.
Overall financial performance and outlook
We expect profit before tax (PBT) for the first half to be approximately £83m, after adjusting for the impact of the new accounting standard IFRS 16 'Leases'. In the prior year, PBT was £70m, which was calculated on an IAS 17 basis. We estimate that the impact of IFRS 16 has been to reduce PBT by approximately £1.3m in the first half of FY20.
Our expectations for the full year remain unchanged since the trading update released on 5 December 2019.
Comment from Nick Wilkinson, Dunelm's Chief Executive Officer:
“We are really pleased with our performance in the first half, building on the strong growth and profitability delivered last year. The second quarter was particularly strong in terms of sales and margin growth, on both one-year and two-year bases.
“The successful launch of our new digital platform during the quarter marked an exciting milestone for Dunelm. The transition to a modern, flexible, cloud-native platform has already improved our customer experience and will allow us to step change our retail innovation capabilities going forward. Our customers have responded well to the new website during Christmas and Winter Sale trading.
“Our ambitious growth plans are centred on extending and enhancing our customer proposition, helping more customers than ever create a home that they love. We are excited by the significant opportunities ahead of us.”