Homewares retailer Dunelm’s (DNLM) unloved shares shed a further 3.3% to trade at 578.5p on the shock news that chief executive John Browett is leaving the company, a little over two years after joining and outlining bold ambitions.

Indeed, the wording of today’s statement seems to imply the value-for-money bedding, curtains and rugs purveyor’s boss may have been pushed out, rather than chucked in the towel.

The announcement states Browett will be stepping down as chief executive for personal reasons, with immediate effect.

‘Dunelm has made good progress over the last two years during John's tenure, however the next phase of growth requires different leadership,’ says the company. It’s that last bit which suggests to us that Browett has been asked to go.

The retailer's share price has nearly halved since early 2016, suggesting the board have lost patience with the CEO.

Until a new head honcho is recruited, chairman Andy Harrison will formally take the role, supported by deputy chairman Will Adderley and numbers man Keith Down.

Dunelm - Product Images

WORLDSTORES WOWS

Browett, the former Dixons Retail, Monsoon and Tesco.com boss and whose CV includes a stint at Apple, was drafted in to drive highly cash generative Dunelm’s e-commerce push in the summer of 2015.

Taking over from founding family member Will Adderley as CEO at the beginning of 2016 following a six month induction period, Browett subsequently oversaw the November 2016 acquisition of Worldstores, one of the UK’s biggest online retailers of home and garden products.

More than doubling the size of Dunelm’s internet operation, the deal brought the Kiddicare nursery supplies business and the Achica members-only online furniture and homewares store into the fold.

Worldstores is expected to provide a ‘massive leap forward to our online and store offer’, as Browett enthused in a recent year-end trading update.

SITTING UNCOMFORTABLY

However, shares in Dunelm have continued to fall from just under £10 in February 2016, reflecting a more difficult market for retailers generally and homewares sellers in particular, as well as forecast downgrades and the short-term impact on trading of investments and changes across the business to enable Dunelm’s future growth.

Dunelm - AUG 17In today’s announcement, Dunelm says trading in the first two months of the new financial year has started positively, ‘with an encouraging like-for-like sales performance’.

This builds on the creditable 3.8% total like-for-like growth, combining stores and home delivery revenues, reported for the fourth quarter to 1 July, which included unhelpfully hot weather conditions during Dunelm’s summer sale.

Dunelm also warned full year profit would weigh in at between £109m-to-£111m, slightly lower than expected, due to sluggish trading over the Easter weekend.

Gross margin for the quarter dropped 75 basis points, reflecting increased discounting and a strong showing from lower margin seasonal goods such as electric fans and garden equipment.

Stockbroker N+1 Singer says the surprise CEO departure doesn’t alter Dunelm’s improving growth prospects.

Ahead of the preliminary results (13 Sep), the broker says investors should look out for ‘news of accelerating new store openings, unlocking significant growth online following the integration of WorldStores, benefits from store refurbishments, the roll-out of Kiddicare and other products/services across the estate and a number of efficiency opportunities as a result of recent systems and infrastructure investment.'

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Issue Date: 30 Aug 2017