14 April 2022
Dunelm Group plc
Third quarter trading update
Dunelm Group plc (“Dunelm” or “the Group”), the UK's leading homewares retailer, reports on trading for the 13-week period ended 26 March 2022.
|
|
Q3 |
Year-to-date |
||||
|
FY22 |
YoY |
2YoY2 |
FY22 |
YoY |
2YoY2 |
|
|
Total sales |
£399m |
+69% |
+40% |
£1,195m |
+25% |
+37% |
|
Digital % total sales1 |
35% |
-58%pts |
+12%pts |
34% |
-16%pts |
+13%pts |
1 Digital includes home delivery, Click & Collect (or Reserve & Collect before October 2019 ) and tablet-based sales in store. Digital represented over 92% of sales in the same period in FY21 as a result of the closure of most of the store estate.
2 2YoY represents performance against the comparable period in FY20. Note that the final weeks of Q3 FY20 were impacted by the beginning of the Covid pandemic and the first national lockdown.
Sustained growth across the total retail system
Total sales of £399m in the third quarter were up 69%, significantly higher than the same period in FY21 when our store estate was closed to customers and only Click & Collect and home delivery services were available. Third quarter sales were 40% higher than Q3 FY20, noting that the final three weeks in that quarter were impacted by the beginning of the Covid pandemic. Excluding those final three weeks, total sales for the first 10 weeks of Q3 FY22 were up 31% compared to the same period in FY20.
Year-to-date total sales were up 37% on a year-on-two-year basis, with continued strong growth in store sales and digital sales being more than double the level of two years ago.
Customers responded well to our Winter Sale held in the first few weeks of the quarter, with a very strong sales performance across most categories. We have continued to refresh our product ranges, with our new 'Summer Living' products performing particularly well during March, as customers looked to ready their homes and gardens for summer.
The GfK data that we use to compare our performance against the homewares and furniture markets3 showed that we continued to gain share in both markets during the quarter.
3 GfK weekly homewares and furniture panel. Note that year on year outperformance is significantly skewed by Dunelm's stores being closed for most of Q3 FY21 whereas many competitors in the market remained open. Compared to FY20, market share gains in both homewares and furniture were also significant.
Continued mitigation of inflationary cost price pressures
Gross margin in the third quarter increased by 30bps compared to the same period last year, and was better than expected due to a slightly lower proportion of sales from discounted lines during our Winter Sale. We continue to work closely with our committed suppliers to take actions to mitigate significant raw materials and freight cost increases. The outlook remains dynamic, and we continue to monitor gross margins closely. Given the robust margin performance in the year to date and the expected impact of the non-like-for-like Summer Sale in the fourth quarter, we anticipate gross margin for the full year FY22 will be broadly similar to FY21.
Financial position
At 26 March 2022, the Group had net debt of £14m (FY21 Q3: net cash £40m) after payment of the £75m special dividend announced at our Interim results in February. The interim dividend of £28m will be paid during the fourth quarter.
Inventories at 26 March 2022 were £224m (FY21 Q3: £193m; FY20 Q3: £147m). As previously advised, we have been building a higher level of inventories to mitigate against ongoing supply chain disruption and to ensure better availability for our customers. As a result, the second half of the financial year includes some additional stockholding costs. We expect inventory levels to remain broadly similar through to year-end.
Operational update
In February we launched a new product collection in collaboration with the Natural History Museum. We have been pleased with both the sales performance as well as the positive sentiment on social media and the excitement amongst our followers. We will be expanding the range further in the summer.
Our new furniture fulfilment hub in Daventry became fully operational during the quarter and we are pleased with how the site is ramping up its capacity. We are excited about the opportunities that this new site will unlock for our customer offer, enabling us to accelerate our growth and gain further market share in the furniture category.
On 1 April we opened a new superstore in Leeds, taking our estate to 176 stores. We expect to open one further new store before the end of the financial year.
Summary and outlook
The Board continues to expect that FY22 PBT will be in line with latest market expectations 4 .
Whilst the macro-economic outlook remains highly uncertain and there are significant pressures on UK consumers, we remain confident in our market leading proposition and see significant opportunities to continue to grow market share.
As set out at the Interim presentation in February, c.85% of our growth over the past five years has been driven through market share gains. Given our broad product range, low average item and basket values, coupled with our focus on providing great value at all price points, we feel well placed despite the uncertainties in the current environment.
4 Management understand the latest range of analysts' estimates for FY22 PBT is £195m-£215m, with consensus of £207m.
Nick Wilkinson, Chief Executive Officer, commented:
“It has been another good quarter for Dunelm with sustained growth across all of our homewares categories, particularly as customers ready their homes and gardens for the summer.
“Performance has been strong across all channels and our new facilities for e-commerce and furniture fulfilment are now fully operational, which will enhance our multi-channel proposition, whilst providing the capacity for further growth.
“Whilst the macro environment remains uncertain, with significant headwinds and increasing pressures on the consumer, our wide product range offers choice for every budget, whether replacing everyday essential items or refreshing a room in your home. The resilience of the Dunelm business model and the ability of our colleagues to adapt quickly to changing circumstances give us confidence in our plans and we remain well placed to continue to grow market share.”