Homewares retailer Dunelm (DNLM) is on investors’ shopping lists on Wednesday.
The cushions, quilts, curtains and kitchenware seller is bid up 2.9% to 890p on a superb third quarter (Q3) sales showing and the news full year pre-tax profit will come in ‘slightly ahead’ of the top of the forecast range.
The fairly modest reaction follows a strong rally for the share price after a string of positive updates from the company.
Confounding the wider high street doom and gloom, just a day after Debenhams lurched into administration, Dunelm’s outstanding share price run continues as the retailer flags ‘a positive homewares market’ and reports a material rise in gross margin thanks to better buying and the positive impact of closing its dilutive Worldstores businesses.
READ MORE ABOUT DUNELM HERE
Market leader in the UK’s £13bn homewares market, Dunelm reports a 12.5% surge in total like-for-like sales for the 13 weeks ended 30 March, accelerating ahead of the impressive second quarter growth rate.
Like-for-like store revenue rose 9.8% to £225.9m, while like-for-like online revenue on Dunelm.com surged 32.1% higher to £38.7m. Total group sales grew by a more pedestrian 6.1% to £284.5m, reflecting the closure of the Worldstores and Kiddicare websites earlier in the year.
Dunelm concedes that ‘political and economic uncertainty remains heightened as we enter the final quarter of our financial year’, but save for any significant changes to current consumer demand trends, reckons full year pre-tax profit will weigh in ahead of the top of the analysts’ £115.6m-to-£118.5m range.
DIGITAL DRIVE
CEO Nick Wilkinson’s push to re-focus on, and raise awareness of, the core Dunelm brand is paying off. Investments in digital technology, including the introduction of tablet-based selling in stores, have improved the shopping experience for customers too.
‘We are delighted that customers continue to respond well to our improving homewares offer as we help them create a home they love’, says Wilkinson.
‘The strong growth in the third quarter reflects our ongoing focus on attracting more customers to the brand and giving them more reasons to shop with us through great product and service. Our performance was also buoyed by a positive homewares market. Our multichannel proposition is improving all the time and we are excited about the opportunities ahead of us as we continue to invest in and develop our digital capabilities.’
THE ANALYSTS’ VIEW
‘An incredible Q3 sales print from Dunelm, well ahead of market expectations’, enthuses Peel Hunt, which sees ‘more upgrades to come’ as it reiterates its positive stance on the stock. The broker now expects to upgrade its full year pre-tax profit forecast from £117.8m to around £121m.
Numis Securities is sticking with a neutral stance on Dunelm however. ‘Although we continue to view the business as a quality operator in the space with strong momentum, we see limited upside at these levels’, cautions the broker.
J.P. Morgan Cazenove is also neutral on the stock, noting that ‘Dunelm has chosen to increase investment in the business, particularly in technology and marketing (which we see as a positive for long run health) and has also flagged that performance incentives will pay out at a higher level given business performance. This has acted to subdue the magnitude of the upgrade.'
