Dunelm Group achieves record sales of £1.64bn

Dunelm Group plc (LON:DNLM), the UK’s leading homewares retailer, has announced its preliminary results for the 52 weeks to 1 July 2023.

Highlights                                           

·    Continuing strong sales growth of 6%⁴, as customers responded well across the breadth of our expanding curated product range (up c.20,000 since FY22)

·    Unrelenting focus on offering value at all price points, passing on cost reductions across over 1,000 products in the spring

·    Further 40bps market share gain in combined homewares and furniture markets⁵

·    Active customers grew by 2.8%⁶, with improved customer retention

·    Three new stores opened, including one relocation; continuing to see strong payback underpinning confidence to accelerate openings over the next two years

·    Progress on our Pathway to Zero commitments⁷, with reductions in Scope 1 carbon intensity and plastic packaging use, both ahead of our targets, and increasing use of sustainable materials

·    Further community engagement with circular solutions, such as take-back services, a threefold increase in our ‘Delivering Joy’ gift campaign for local causes, and over £800k raised for charities

Financial highlights

·    Record sales of £1.64bn (FY22: £1.55bn⁴)

·    50.1% gross margin (FY22: 51.2%⁸), in line with our expectations, demonstrating tight operational grip

·    Continued to focus on growth, investing more than £20m in digitalising our end-to-end operations and growing capability to seize multiple future opportunities

·    Profit before tax (“PBT”) of £193m (FY22: £209m⁹), reflecting tight control of margin amidst inflation in our operating costs and our ongoing commitment to investment for the future

·    £160m free cash flow (FY22: £153m)², with strong conversion of operating profit to cash of 81% (FY22: 70%)

·    Final ordinary dividend of 27p per share (FY22: 26p) taking the full year ordinary dividend to 42p per share (FY22: 40p), an increase of 5%, reflecting confidence in the future growth prospects of the business

·    £163m in total returned to shareholders during the year, including special dividend of 40p declared with the interim results and paid in April. Over £1bn returned over the past ten years¹⁰

Current trading and outlook

·    Pleased with trading early in the new financial year

·    Consumer behaviour remains unpredictable but value proposition resonating well and expect to see FY24 sales and PBT growth, driven by volume

·    Easing freight costs support gross margin

·    Tight operational grip to help mitigate ongoing inflation in operating costs

·    Continuing to invest in our customer offer, total retail system and marketing ecosystem to support sustainable growth

·    Never been more confident in our plans to seize opportunities in the short, medium and long term

Nick Wilkinson, Dunelm Group Chief Executive Officer, commented:

“In a period of extensive economic uncertainty, we have maintained our focus on enhancing our customer proposition, expanding our offer whilst staying fully committed to value and making every pound count. This has clearly resonated well with our customers, enabling us to continue growing both sales and market share. As ever, our amazing colleagues have been at the heart of this performance and I thank them all for their knowledge, personality, commitment and enthusiasm.

“As we manage the ongoing challenges, it is crucial that we do not lose sight of our longer-term ambitions. We are committed to raising the bar on value and joy for our customers and continuing to invest where we see good returns, so that we can seize the various opportunities ahead.

“We are excited about our future growth opportunity and more confident than ever that our commitment to value and tireless focus on improving the experience for our home-loving customers will leave us well placed to deliver sustainable growth in the future.”

¹ Digital includes home delivery, Click & Collect and tablet-based sales in store.

² Free cash flow is defined as net cash generated from operating activities less capex (net of disposals) and business combinations, net interest paid (including leases) and loan transaction costs, and repayment of principal element of lease liabilities. A reconciliation of operating profit to free cash flow is included in the CFO review.

³ Excluding lease liabilities. Full definition provided in the table of alternative performance measures.

⁴ For statutory purposes FY22 included a 53^rd week. Sales and sales growth are shown on a comparable 52-week basis. On a 53-week basis FY22 sales were £1,581m and sales growth was 4%.

⁵ GlobalData UK combined homewares and furniture markets, excluding kitchen and bathroom furniture. Market share for the period July 2022 to June 2023 was 7.2%.

⁶ Growth in unique active customers who have transacted at least once in the 12 months to June 2023. Management estimates using Barclays data.

⁷ Our Pathway to Zero commitments are described in more detail in the sustainability section of our corporate website at https://corporate.dunelm.com/sustainability.

⁸ For statutory purposes FY22 included a 53^rd week. Gross margin is shown on a comparable 52-week basis. On a 53-week basis FY22 gross margin was 51.2%.

⁹ For statutory purposes FY22 included a 53^rd week. PBT is shown on a comparable 52-week basis. On a 53-week basis FY22 PBT was £213m.

¹⁰ Ordinary dividends plus special dividends plus special distributions.

Analyst Presentation:

There will be an in-person presentation for analysts and institutional investors this morning at 9.30am, hosted at Peel Hunt LLP, 100 Liverpool Street, London, EC2M 2AT, as well as a webcast and conference call with a facility for Q&A. For details, please contact [email protected]. A copy of the presentation will be made available at https://corporate.dunelm.com.