Homewares retailer Dunelm (DNLM) now expects full year pre-tax profits to come in at around £158 million, ‘slightly ahead’ of analysts’ £149 million-to-£153 million forecast range, having seen a strong sales since reopening stores on 12 April and a higher gross margin rate than anticipated.
However, the shares fell 2.9% to £13.98 as the bedding, curtains and cushions seller said success with online sales has warranted heavy investment in additional warehousing and distribution infrastructure to underpin future growth.
Delaying its summer sale into the new financial year boosted fourth quarter gross margins, since the retailer didn’t have the dilution effect from discounts. But this will also create a margin headwind in the current financial year, which will have three sales instead of the traditional two.
STILL DELIVERING THE GOODS
Dunelm’s total sales in the fourth quarter ended 26 June 2021 came in at £380.1 million, more than double that generated in the same period last year when stores were shuttered during the first national lockdown, and with digital sales stayed strong throughout the final quarter.
Total sales were also up 43.9% on the comparable pre-pandemic period in 2019, which Dunelm insisted demonstrates ‘the increasing appeal of our improving homewares proposition for both new and existing customers’.
Since reopening physical stores in April, Dunelm believes it has ‘delivered sales growth materially ahead of the market’ and ‘gained meaningful share over the full year. This is despite significant periods of store closures during which some of our competitors were allowed to remain open’.
THE EXPERT’S VIEW
AJ Bell financial analyst Danni Hewson commented: ‘Dunelm is widely considered to be a top-notch retailer and its proposition of affordable but good quality homeware products has resonated with consumers as much more attention is paid to the state of one’s home.
‘Lockdown brought about a big surge in DIY activity in order to make the home a nicer place to be. It’s not all about fixing broken fences and having a splash of new paints on the walls. The home improvement bug also includes the bedding, curtains, blinds and other items sold by Dunelm.
‘Fortunately, it had already made a big investment in the digital channel prior to the pandemic so it was able to capitalise on heightened interest in its products as more people went online. Ultimately the trading performance seen over the past year or so would suggest Dunelm falls under the category of “the strong are getting even stronger”.
