Dunelm Group plc (LON:DNLM), the UK’s leading homewares retailer, reported the following trading update for the 13-week period ended 29 December 2018.
Revenue
Total LFL revenue growth for our second quarter was +9.0%, a pleasing result which builds upon the positive trading experienced in the first quarter.
– LFL store revenue increased by +5.7% year on year
– LFL online revenue on Dunelm.com continued to grow strongly in the quarter by +37.9%
– Total multi-channel revenue for the quarter, defined as LFL online revenue plus Reserve & Collect and tablet-based selling in-store, represented 16.5% of revenue, an increase of +4.1ppts year on year.
Total revenue growth of the continuing Dunelm business, including the benefit of changes to the store portfolio, was +9.6%.
Total growth at group level was +2.0%, reflecting the closure of the Worldstores and Kiddicare websites as previously announced.
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13 weeks to 29 December 2018 |
26 weeks to 29 December 2018 |
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Revenue (£m) |
YoY Growth (£m) |
YoY Growth (%) |
Revenue (£m) |
YoY Growth (£m) |
YoY Growth (%) |
|
LFL Stores1 |
246.4 |
+13.3 |
+5.7% |
444.2 |
+16.3 |
+3.8% |
|
LFL Online – Dunelm.com2 |
36.1 |
+9.9 |
+37.9% |
62.5 |
+16.5 |
+35.8% |
|
Total LFL |
282.5 |
+23.3 |
+9.0% |
506.8 |
+32.8 |
+6.9% |
|
Non-LFL Stores3 |
21.5 |
+3.4 |
– |
41.4 |
+11.0 |
– |
|
Total Dunelm |
304.0 |
+26.6 |
+9.6% |
548.2 |
+43.7 |
+8.7% |
|
Non-LFL Online – Worldstores4 |
-0.4 |
-20.6 |
– |
3.6 |
-37.4 |
– |
|
Total Group |
303.6 |
+6.0 |
+2.0% |
551.8 |
+6.4 |
+1.2% |
1. LFL Stores – stores trading for at least one full financial year prior to 1 July 2018 without any significant change of space. LFL stores revenues include Reserve & Collect sales, and home delivery sales in respect of orders placed via in-store tablets
2. LFL Online – Dunelm.com (excludes Reserve & Collect sales, and home delivery sales in respect of orders placed via in-store tablets)
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. Non-LFL Online – Worldstores.co.uk, Kiddicare.com and Achica.com (these websites are now closed)
Gross Margin
Following the elimination of lower margin sales from the Worldstores businesses, gross margin has continued to improve as expected. We estimate gross margin has increased by approximately +190bps at the Group level compared with the second quarter last year. More importantly, we have seen growth in the continuing Dunelm gross margin of around +120bps, as the dilutive effect of the Worldstores’ lines transferred to Dunelm.com has been more than offset by FX benefits and improved sourcing.
Business Development
We are now fully focused on delivering our core Dunelm customer offer, having closed the Worldstores and Kiddicare websites, and we continue to invest in our new Home of Homes brand campaign. This integrated marketing campaign across TV, radio and social media platforms is part of our Customer 1st drive to reach new customers. It is early days, but initial results are encouraging.
Development of our multichannel propostion remains a priority and we expect to begin the launch of our new website to customers in the fourth quarter. This is slightly later than previously communicated as we evolve and optimise our plans. The new platform will offer Click & Collect to customers, and allow us to develop our multichannel offer with greater agility going forward.
We have not opened or relocated any stores during the quarter, leaving our superstore footprint at 169. We expect to open one new store (a relocation) towards the end of the financial year.
Overall Financial Performance and Outlook
We expect PBT in the first half to be approximately £70m after taking an impairment charge of £3.8m in relation to the Fogarty brand1 (FY18 H1: £60.0m before exceptional costs). In the prior year the financial results included £6.9m of trading losses from the Worldstores businesses.
Given unprecedented levels of uncertainty currently facing consumers and businesses in the UK, we remain cautious about our full year outlook. If the homewares market continues to grow at a similar rate to that experienced in the first half, we expect to deliver full year PBT modestly ahead of the top of the range of current analysts’ forecasts2.
The Group remains highly cash generative; as at 29 December 2018, net debt was £73m (FY18 H1: £134m) and weekly average net debt across the first half amounted to £81m (FY18 H1: £117m).
Comment from Nick Wilkinson, Dunelm’s Chief Executive:
“We are pleased with our overall performance in the first half, and are helping more customers than ever to create a home they love. By focusing back on our core business, under one Dunelm brand, we are improving our trading and financial performance.
“The positive like-for-like revenue growth both in stores and online, highlights the strength of our customer offer. Our multichannel proposition is improving all the time, and we are looking forward to introducing our new web platform in the summer, using more flexible technology which will allow us to better serve our customers in a changing retail landscape.
“Despite our strong performance in the year to date, we remain cautious on the outlook for the second half given the ongoing uncertainty in the UK economy. However, in the medium term, we see significant opportunity to grow the business by focusing on our customers and seizing opportunities in a digital world.”
